Explanation
DTI is not factored into credit scores, but it is one of the most important metrics lenders use when underwriting mortgages, auto loans, and large personal loans.
Most lenders prefer a DTI below 36%; mortgage lenders generally cap allowable DTI between 43% and 50% depending on the program.
Examples
- •$2,000 in monthly debt ÷ $6,000 gross income = 33% DTI
- •Front-end DTI = housing payment ÷ income
- •Back-end DTI = all debts ÷ income
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