What is DTI?

Here’s what you need to know about debt-to-income ratios.  

If you want to buy a home, you’ve probably heard your lender mention the term debt-to-income (DTI) ratio, but what is it, and how do lenders use it to determine your loan eligibility?

Simply put, your DTI ratio is critical to making sure you can afford your monthly mortgage. In general, your lender will review two things to confirm you are eligible for the loan. The first part is the front end, which includes your monthly home expenses. The second factor is the back end, or the portion of your monthly income that goes toward paying debts. Ideally, you need about a 28% DTI ratio for the former and around 36% for the latter to qualify for a mortgage. 

Talk to your lender to find out your DTI ratio, and if you don’t qualify, try lowering your monthly expenses or paying off your debts. As always, if you need more details about this topic or have any other real estate concerns, don’t hesitate to call or email me. I’m always happy to help!