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Question 7

Lenders use debt-to-income ratio (DTI) as a quick measure of whether your recurring debt payments fit within your income. DTI is expressed as a percent: total recurring monthly debt payments divided by gross monthly income. It’s different from savings rate or net income — DTI is a shorthand for lenders to estimate repayment capacity, and common underwriting guidelines flag higher DTIs as greater risk. When you prepare a loan application or plan your budget, calculating DTI helps you see whether a new monthly payment fits comfortably. For this example, we’ll use common monthly obligations — rent or mortgage, car payment, minimum credit-card payments, and student loan obligations — and compare the total to gross monthly pay to show the simple arithmetic lenders perform during prequalification.

If gross monthly income is $5,000 and monthly debts are $1,200 rent, $350 car, $150 minimum credit, and $200 student loan, what is the DTI percent?

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By Wise Wallet

Adding international exposure to a portfolio spreads risk because different countries’ markets and economies don’t move in lockstep.