Your debt-to-income ratio (DTI) is one of the most important factors lenders consider when you apply for a mortgage. It is a measure of your ability to afford monthly debt payments, including your mortgage, as a percentage of your gross monthly income.
A lower DTI ratio generally means you are a more attractive borrower and it will result in higher purchasing power.
To calculate your DTI ratio, follow these steps:
For example, if your monthly debt payments total $2,000 and your gross monthly income is $5,000, your DTI ratio would be 40%.
Lenders typically have a maximum DTI ratio they will accept. This maximum DTI for Non-Jumbo loans is 50%. The maximum DTI for Jumbo loans is usually between 43-45% depending on the lender.