ST. CLAIR SHORES, MI, September 4, 2024 – When applying for a loan or mortgage, one of the most critical factors lenders evaluate is your Debt-to-Income (DTI) ratio. At First State Bank, we believe in empowering our customers with the knowledge they need to make informed financial decisions. Understanding your DTI ratio can help you assess your financial health and increase your chances of securing a loan.

The DTI ratio is a straightforward calculation that compares a borrower’s monthly debt payments to their gross monthly income. Expressed as a percentage, the DTI ratio is used by lenders to assess a borrower’s ability to manage monthly payments and repay borrowed funds.

“For lenders, the DTI ratio provides insight into a borrower’s financial stability and risk profile. A lower DTI ratio indicates a healthy balance between debt and income, making the borrower a more attractive candidate for loans.” Amy Persyn, Chief Marketing Officer and Senior Vice President of First State Bank said. “Conversely, a higher DTI ratio may suggest that the borrower is overextended and could struggle to meet additional debt obligations.”

First State Bank encourages customers to calculate their DTI ratio by adding up their monthly debt payments including all recurring debt obligations, such as mortgage or rent, car loans, student loans, credit card payments, and other fixed debts. Next customers should calculate their gross monthly income, by calculating all sources of income before taxes and deductions, including salary, bonuses, and rental income. Finally, divide the total monthly debt payments by their gross monthly income, then multiply the result by 100 to determine the DTI ratio.

The ideal Debt-to-Income (DTI) ratio varies by lender and loan type, but generally, a DTI ratio of 36% or lower indicates a manageable level of debt relative to income. Ratios between 37% and 43% are often acceptable, especially for mortgages, though lenders may also consider other factors like credit score and employment history. A DTI ratio of 44% or higher may raise concerns about a borrower’s ability to manage additional debt, potentially impacting loan approval.

For those looking to improve their Debt-to-Income (DTI) ratio, First State Bank recommends several strategies. Start by paying down debt, focusing on high-interest obligations like credit card balances. Consider increasing your income by exploring additional income-generating opportunities, such as part-time work. It’s also important to avoid taking on new debt until your

DTI ratio is in a healthier range. First State Bank is committed to helping customers achieve their financial goals. Whether you're aiming to lower your DTI ratio or exploring loan options, our experienced team is here to provide you with personalized advice and tailored solutions. Contact us today to discuss your financial situation and discover how we can support you on your journey to financial security.

First State Bank is headquartered in St. Clair Shores, Michigan. With over 100 years of service and $980 million in assets, First State Bank serves Macomb County with 12 branch offices located in Chesterfield Township, Clinton Township, Eastpointe, Macomb Township, Richmond, Rochester, St. Clair Shores, Sterling Heights, Washington Township, and a Loan Center in Clinton Township. For more information, please visit www.fsb.bank or call 866-372-1275. 

For Immediate Release

Company / Media Contacts:

Amy Persyn, Chief Marketing Officer, Senior Vice President

apersyn@fsb.bank

www.fsb.bank