What is DTI?

When applying for a home loan there are multiple qualifying factors considered such as income and debt. This is an important factor to understand as it will directly relate to what range of products you qualify for.

DTI is your debt to income ratio and is as important as any other factor. The ratio is determined by dividing your income by the amount of monthly debt that is reported on your 3 major credit bureau reports.

Example: $5000 monthly gross income / $2000 monthly credit reported obligations = 40% DTI

Lenders scale this ratio and will restrict the type of programs you can access and the loan amounts as this ratio exceeds 38%. The higher the ratio, the more limited you are. Once you reach 45% and higher the lender programs are considered sub-prime. These programs allow for as high as 55% DTI’s but of course at higher rates. There are programs that disregard this ratio completely but that will cost you in the rate and in loan amount restrictions.

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