Debt-to-Income (DTI) Ratio

The percentage of gross monthly income spent on debt payments. Mortgage lenders add current debts to projected mortgage payments to help determine loan qualification and usually like to see the debt percentage below 40%. Pro tip: multiply your monthly income by 0.4, then subtract your student loan payment, car payment, credit card payment, and any other loan or alimony payments. What’s left could be a reasonable estimate of your maximum monthly mortgage budget.