Debt to Income Ratio

A debt-to-income ratio smaller than 36%, however, is preferable, with no more than 28% of that debt going towards servicing a mortgage. While the maximum DTI will vary by lender, the lower the number, the better the chances that an individual will be able to get the loan or line of credit he or she wants.
For example, John pays $1,000 each month for his mortgage, $500 for his car loan, and $500 for the rest of his debt each month. Therefore, his total recurring monthly debt equals $2,000 = $1,000 + $500 + $500. If John’s gross monthly income is $6,000, his DTI would be $2,000 / $6,000 = 0.33, or 33%.
There are two ways to lower debt-to-income: reduce monthly recurring debt and/or increase gross monthly income. Using the above example, if John has the same recurring monthly debt of $2,000 but his gross monthly income increases to $8,000, his DTI would be $2,000 / $8,000 = 0.25, or 25%. Similarly, if John’s income stays the same at $6,000, but he is able to pay off his car loan and reduce his monthly recurring debt payments to $1,500, his DTI would be $1,500 / $6,000 = 0.25, or 25%. If John is able to both reduce his monthly debt payments to $1,500 and increase his gross monthly income to $8,000, his DTI would be $1,500 ÷ $8,000 = 0.1875, or 18.75%.


Read more: Debt-To-Income Ratio (DTI) https://www.investopedia.com/terms/d/dti.asp#ixzz5UQXY8PhG 
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