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The debt-to-income ratio is a critical financial metric used by lenders to evaluate an applicant's ability to manage a mortgage, as mortgage payments are explicitly included in the ratio's calculation [1] and are subject to specific lender thresholds [2]. Furthermore, this ratio serves as a primary tool for banks to assess affordability when an individual applies for a mortgage [3].
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How to Calculate Your Debt-to-Income ratio (DTI) | New York Life newyorklife.com 1 fact
formulaThe calculation for debt-to-income (DTI) ratio is: (Sum of all monthly debt payments, including mortgage, loans, and minimum credit card payments) divided by (Gross monthly income).