Finance
A borrower's debt-to-income (DTI) ratio is calculated as:
AMonthly housing payment divided by annual gross income
BTotal monthly debt obligations divided by monthly gross income✓ Correct
CAnnual net income divided by total outstanding debt
DMonthly net income divided by total monthly expenses
Explanation
DTI ratio = Total monthly debt obligations ÷ Monthly gross income. For example, if a borrower has $2,500 in monthly debt payments and earns $7,000 gross per month, DTI = $2,500 ÷ $7,000 = 35.7%. Most conventional loans prefer a DTI below 43%.
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