A debt-to-income ratio can be a determining factor in a mortgage loan approval. It is the ratio of a borrower’s monthly expenses to their gross monthly income. It can be calculated fairly easily by dividing your monthly expenses (car payment, mortgage payment, credit cards, etc.) by your gross monthly income (before taxes). For instance, if your monthly expenses are $2,000 and your gross monthly income is $5,000, your debt to income ratio is 40%. As a rule of thumb, most conventional lenders will want to see that your DTI is below 50% while FHA lenders will want to see that you are below 41%.
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