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What is Debt-to-Income Ratio?

Your debt to income ratio (DTI) can be as important a determinant in deciding your loan eligibility as your credit score. DTI is nothing only the total quantity of debt you are servicing as compared to your income.

Lenders calculate your DTI by dividing your total debt payments in a month (this includes your auto loan, personal loan, credit card payments etc. as applicable) with your total income.

It is advisable to keep the DTI ratio below 35%. A low DTI is an indication that you are financially sound and therefore increases your prospects of qualifying for a home loan quickly. Lenders do scrutinize the DTI ratio when you are applying for credit because it's an indicator of your ability to repay your debts.