The debt-to-income ratio is a percentage figure used in the lending industry to estimate how much (as a percentage) of your monthly income will be going to pay your monthly debt payments (and how much you can afford). The debt-to-income ratio is easily calculated by dividing your fixed monthly debt expenses by your gross monthly income.
It is calculated by taking your prospective monthly debt payments (PITI, auto loans, credit cards, student loans, personal loans, alimony, child support, etc.), divided by your gross monthly income. A percentage of less than 40% is considered to be a good debt service indicator.
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