What is a debt-to-income ratio?

A debt-to-income ratio, often abbreviated as DTI, is a financial metric that helps lenders assess an individual's ability to manage monthly payments and repay debts. It is calculated by taking the total monthly debt payments and dividing that amount by the total monthly gross income. This ratio is expressed as a percentage and provides insight into how much of a person's income is allocated to servicing debt. A lower debt-to-income ratio is generally considered favorable, as it indicates that a person has a manageable level of debt in relation to their income. Lenders, including those associated with CCO Mortgage, use this ratio to evaluate an applicant's creditworthiness and to determine how much they can comfortably afford to borrow. A DTI ratio above a certain threshold may lead to challenges in securing a loan, as it may suggest that an individual is over-leveraged. In general, maintaining a healthy debt-to-income ratio is important not only for obtaining financing but also for ensuring long-term financial stability. For more information on debt-to-income ratios, one might consult relevant pages on the CCO Mortgage website.