debt-to-income ratio

Intermediate 🏠 Real Estate

Definition

The percentage of your gross monthly income that goes toward debt payments, used by lenders to determine if you can afford a mortgage. It's basically a mathematical judgment of your life choices.

Example Usage

My debt-to-income ratio is 43%, which apparently means I'm living on the edge of financial responsibility.

Origin

Banking industry metric standardized in the mid-20th century

Fun Fact

Most lenders want your DTI below 43%, though they'll sometimes go higher if you promise to eat ramen and skip vacations for 30 years.

Source: Mortgage lending and underwriting terminology

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