Debt-to-income ratio is the share of your gross monthly income that goes to debt payments. Lenders use it to judge how much new debt you can handle. The common 28/36 rule caps housing costs at 28% of income and total debt at 36%.
A lower DTI improves your odds of loan approval and a better rate. Paying down existing debt or raising income lowers DTI and expands how much home or loan you qualify for.
Related terms: Marginal Tax Rate · Dividend Yield