When buying a home, the debt-to-income ratio (DTI) is an important financial metric that lenders use to assess your ability to manage monthly mortgage payments alongside your other debts. It compares your total monthly debt payments (like credit card bills, car loans, and student loans) to your gross monthly income (before taxes).

DTI is expressed as a percentage. For example, if your total monthly debt payments are $2,000 and your gross monthly income is $6,000, your DTI would be 33% ($2,000 ÷ $6,000).

Lenders typically prefer a lower DTI, as it suggests you’re less financially burdened by existing debts. Many lenders look for a DTI of 43% or lower, though requirements may vary depending on the loan type and the lender. A lower DTI can also improve your chances of securing a loan with favorable terms.

Would you like to dive into how to calculate yours or tips to lower it?