What is Your Debt-To-Income (DTI) Ratio

1
What is Your Debt-to-Income Ratio? And Why is it
Important?
2
What is a Debt-to-Income Ratio (DTI)?

• An official calculation showing how much debt you
  owe in a month compared to your monthly gross
  income.
• DTI (Monthly Debt Obligations Gross Income)
  X 100

3
What is a Good DTI?

• A lender wants to see a low ratio because it
  suggests you have fewer existing debts tying up
  your cash.

• According to the Consumer Financial Protection
  Bureau (CFPB), 43 is generally the highest DTI
  that may get you a Qualified Mortgage Loan. 

4
What is the 28/36 Rule?

• The 28
• This rule specifies you shouldnt spend more than
  28 percent of your gross monthly income on
  housing expenses.

• The 36
• The 36 in the rule specifies your DTI shouldnt
  be more than 36 percent of your gross monthly
  income.

5
How to Improve Your DTI

• Increase your income
• Decrease your debt

6
Steps to reduce your total debt amount

• Throw a Debt Snowball
• This strategy focuses your debt repayment on the
  smallest loan first. A quick win may give you the
  morale boost you need to tackle the next largest
  loan.

• Cause a Debt Avalanche
• This strategy focuses on paying off the loan with
  the highest interest first. This may help limit
  how much interest you pay.

• Cut Expenses
• Find expenses you can live without. You can put
  this extra cash towards your debt payments.

• Use personal loans only in an emergency
• Put large, unnecessary purchases on the
  backburner for now, especially if youd need to
  take out credit to make them.

• Earn more money
• Increasing monthly income will lower your DTI
  ratio if your debt payments remain the same.

7
Your DTI Matters
Low DTI

• With a lower DTI and a potentially higher credit
  score, you may have greater financial options

• The most immediate benefit is that this may keep
  more cash in your pocket!

8
Thanks!
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