The debt to income ratio compares what you must pay each month on debts with what you earn. Lenders use versions of it when they decide loan size. A high ratio means more of each paycheck is already spoken for, so shocks hurt more.
Key takeaways
- Include all contractual debt payments, not only the loan you are applying for.
- Use a consistent income definition (gross vs net) when you compare figures.
- Lowering DTI means raising income, cutting debt, or both.
- A flattering ratio built on unstable overtime is riskier than it looks.