Credit Card Terms - debt-to-income-ratio

If you have applied for a loan, a mortgage you may have heard the term dept-to-income ratio (DTI).

Debt-to-income ratio means the ratio of all your debt: car loan, mortgage, student loans, credit card debt etc. to your income (gross income).
High debt-to-income ratio may mean higher interest rates, higher down payment on a mortgage. If the ratio is very high you may not even get qualified for a home loan. For example a mortgage broker may require a debt-to-income ratio of 28/36. These two numbers indicate a front ratio and a back ratio. Note. Different loan programs may have different DTI limits.

For example: Your monthly gross salary is $4000

28% of $4000 = $1120
36% of $4000 = $1440

28% specifies the amount allowed toward house expenses. 36% housing expenses plus recurring debt payments such as credit card payments, car loans etc.