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What Is Debt-to-Income Ratio? The Key to Qualifying for a Mortgage

So, what do debt and income have to do with obtaining a home loan? Your debt-to-income (DTI) ratio helps lenders figure out how (or whether) a home purchase can fit into your financial picture. To calculate your DTI ratio, you simply divide your ongoing monthly debt payments by your monthly income. Get Pre-Approved For installment debt, which is money you owe in fixed payments for a fixed number of months—such as installments you owe on the washer/dryer or A/C unit you purchased—use the current monthly payment. However, that's your DTI ratio without a monthly mortgage payment. Lenders use your DTI ratio to assess your ability to pay for a loan. A higher DTI ratio could mean you’ll pay more interest, or you could be denied a loan altogether. Some lenders will loan money to people with DTI ratios exceeding 36%, but it's rare. To verify debt, you’ll have to provide official documents, such as credit card statements, that show the debts you currently owe. Once you have that information, you can connect with a mortgage lender that will help you get a home loan.