Using the total of monthly debt obligations, if this amount is $2,000 and the monthly gross income is $6,000, what is the debt-to-income ratio?

The debt-to-income ratio (DTI) is calculated by dividing the total monthly debt obligations by the gross monthly income, then multiplying the result by 100 to express it as a percentage. In this scenario, the total monthly debt obligations are $2,000, and the monthly gross income is $6,000.

To find the DTI, you would perform the calculation as follows:

1. Divide the total monthly debt obligations by the gross monthly income:

[

DTI = \frac{2,000}{6,000} = \frac{1}{3}

]

2. To express this fraction as a percentage, multiply by 100:

[

DTI = \frac{1}{3} \times 100 \approx 33.33%

]

This value rounds to approximately 33%. This ratio is important in lending practices as it helps determine a borrower's ability to manage monthly payments and repay debts. Lenders often use this ratio when deciding whether to approve a loan application, with lower percentages generally indicating a lower risk to the lender. A DTI of 33% suggests a manageable level of debt in relation to income, which is why this ratio is seen as acceptable