Debt-to-Income Ratio (DTI)
The percentage of your gross monthly income that goes toward debt payments, including the proposed new mortgage.
DTI compares your monthly debt obligations to your gross monthly income. The numerator includes the proposed PITI, plus any other monthly debt: car loans, student loans, credit card minimums, child support, alimony, and other installment obligations.
Conventional loans generally allow DTI up to around 45%–50% depending on compensating factors. Government programs, FHA, VA, and USDA, often permit somewhat higher DTIs because the agency guarantee lowers the lender's risk on each loan.
Lowering DTI before applying is one of the highest-leverage things a borrower can do. Paying off a car loan with three months left, eliminating a small credit card balance, or restructuring student loans can each shift a tight file into the approval zone.
Related terms
Other terms you'll see alongside Debt-to-Income Ratio
The percentage of your gross monthly income consumed by total housing costs (PITI).
The lender's formal review of a loan application to confirm it meets program guidelines and is acceptable to fund.
A three-digit number summarizing your credit history, used by lenders as a primary risk metric.
A lender's preliminary commitment to lend you a specified amount, based on a review of credit, income, and assets.
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