What is DTI?
If you’re buying a home for sale in Riverview, it’s time to get familiar with lending terms – and one of them is debt-to-income ratio, or DTI.
What is DTI?
Debt-to-income ratio is a factor that lenders use to determine whether you’re likely to have enough money to pay them back for a mortgage loan.
Your DTI is the percentage of your total monthly debt compared to your monthly income.
The formula looks like this:
Monthly expenses/monthly income = DTI
Most lenders want your debt-to-income ratio to be lower than 45 percent; ideally, it’ll be below 36 percent, with no more than 28 percent going toward your housing expenses.
There are two ways to lower your DTI. You can earn more each month, perhaps by combining incomes, or you can pay down monthly debt obligations like credit card balances and other loans.
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