Debt to Income Ratio Explained
Debt to income ratio compares how much you owe each month to how much you earn. It helps lenders understand how much room you have in your budget.
Why Debt to Income Matters
This ratio shows how comfortably a borrower may handle a new monthly payment. Lower ratios generally indicate more flexibility, while higher ratios may limit options.
What Is Included in the Calculation
Debt to income usually looks at recurring monthly obligations like loans and credit cards, compared to gross monthly income. It does not measure spending habits, only existing commitments.
Why This Is Only One Piece of the Picture
Debt to income is important, but it is not the only factor lenders consider. Savings, credit history, and overall stability also matter.
What Comes Next
Explore more guides in the Learn Hub section or try the Home Readiness Check™ to see how prepared you are for buying a home.