The Loan Doctors Team

What’s My Debt-to-Income (DTI) Ratio?

Debt-to-Income (DTI) is one of the many new mortgage related terms many First-Time Home Buyers will get used to hearing.

DTI is a component of the mortgage approval process that measures a borrower’s Gross Monthly Income compared to their credit payments and other monthly liabilities.

Debt-to-Income Ratios are designed to give guidance on acceptable levels of debt allowed by particular lenders or programs.

There are actually two different Debt-to-Income Ratios that underwriters will review in order to determine if a borrower’s monthly income is sufficient to cover the responsibility of a mortgage according to the particular lender / mortgage program guidelines.

Most loan programs allow for a Total DTI of 43% and a Housing DTI of 31%.

Two Types of DTI Ratios:

a) Front End or Housing Ratio:

  • Should be 28-31% of your gross income
  • Divide the estimated monthly mortgage payment by the gross monthly income

b)  Back End or Total Debt Ratio:

  • Should be less than 43% of your gross monthly income
  • Divide the estimated house payment plus all consumer debt by the gross monthly income

Remember, the DTI Ratios are based on gross income before taxes.  Lenders also prefer to use W2’s or tax returns to verify income and employment.

However, the adjusted gross income is used to calculate DTI for self-employed borrowers on most loan programs.  Since there is room for interpretation on these guidelines, it’s important to review your personal income / employment scenario in detail with your trusted mortgage professional to make sure everything fits within the guidelines.

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March 28, 2010 by · Leave a Comment

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About The Loan Doctors

The Loan Doctors is a team of very experienced Senior Loan Officers who have mastered the art of qualifying clients that would not otherwise qualify anywhere else. Much of our business comes from builders, when they cannot qualify their clients with their in-house lenders, and our Real Estate Agents, when their clients get declined with other mortgage companies. We understand that many potential home-buyers do not have perfect credit or perfect job history so we have built our whole entire business helping these home buyers that no one wants to help. We believe that credit should never be the reason why you are not able to achieve your dream of purchasing a home. When it comes to rebuilding your credit & restoring your dignity you need a team of experts behind you every step of the way. We are prepared to listen to you with compassion & understanding to help you move forward to a brighter future. During our consultation, we create a customized written plan for each client. Our staff will then follows up with each client regularly to ensure that the borrower is properly following on our recommendations. Our goal is to help our borrower's to get back on the road to financial recovery straightaway as soon as possible.

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