Debt-to-income ratio

Debt-to-income ratio

A debt-to-income, or DTI, ratio is derived by dividing your monthly debt payments by your monthly gross income. The ratio is expressed as a percentage, and lenders use it to determine how well you manage monthly debts — and if you can afford to repay a loan.

Lenders typically say the ideal debt-to-income ratio should be no more than 28 percent. In reality, depending on your credit score, savings, assets and down payment, lenders may accept higher ratios, depending on the type of loan you’re applying for.