What is debt-to-income ratio?


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Your debt-to-income ratio is the total portion of your monthly income that goes to debts. For example, if your monthly income is $5,000, your debts should not exceed $1,400 to stay at the 28 percent ratio. Some debts may include student loans, credit cards, car payments, child support or any other form of debt. For mortgage purposes, your debt-to-income ratio is critical.

A lot of debt and good credit

Even if you have a good credit score, a high debt-to-income ratio might mean you aren’t approved. Usually, lenders look for a score of no more than 28 percent of your monthly income going to debt. Other factors, such as a large down payment, may have lenders looking more favorably on a somewhat higher debt-to-income ratio.

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