Debt to income ratio

7 Replies

Good evening , I am new to investing and my goal is to take control of my own finances and improve my financial health. I understand that this takes time and discipline which is fine . There are two things I have questions about and I was looking for help toget answers these questions. What exactly is debt to income ratio , does this only apply to credit ? Or is this a term used for financial health? In regards to debt to income ration , what do banks and mortgage lenders look for and what is most important when presenting financial information? Ok... that is definitely more tha two questions but any question that BP can answer would be great!! Thanks in Advance!
@Tevin Swain Let’s say you make 60k a year. Which is 5k gross a month (don’t factor taxes in your DTI). Your car payment, house payment, student debt etc etc (all monthly debt) adds up to 1000 a month. Your DTI is 1000/5000 is 20 percent. Banks (conventional loans) want less then 35 or 40 percent usually
Originally posted by @Tevin Swain :

@Caleb Heimsoth Thank you , basically I should keep my monthly expenses as low as possible to increase my savings and control my spending? 

Sure that never hurts but it doesn't matter what you spend that doesn't affect your DTI. I've never had a bank even ask for my credit card statement. They only care about my income, my long term debts and my DTI

Investopedia is a good place to learn different financial terms. Like others have mentioned, they care about your debt aka liabilities aka money you owe people. What you spend at the store or whatever isn't a liability as you didn't owe that money.