Mortgage glossary
Debt-to-income ratio (DTI)
Definition: The debt-to-income ratio (DTI) is the percentage of a borrower's gross monthly income that goes toward monthly debt payments, including the new mortgage, used by lenders to measure affordability.
Lenders add the proposed housing payment to minimum monthly payments on car loans, student loans, credit cards and other obligations, then divide by gross monthly income. Some programs also look at a front-end ratio that counts only the housing payment. Maximum DTI depends on the program and on strengths such as credit and reserves.
Because Texas has no state income tax but relatively high property taxes, the tax portion of the payment can push DTI higher here than buyers expect. Paying off small debts before applying can help, and some non-QM programs qualify without a DTI calculation at all.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
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