MORTGAGE 101
What Is A Debt To Income Ratio?
Welcome to Mortgage 101. We help home buyers and realtors understand home loans. You’re in the right place if you’re thinking of buying your first home, if you’re moving to your next home, or if you’re ready to refinance your existing loan.
What Is A Debt To Income Ratio?
Debt to income ratios (also called DTI) is the amount of money going out divided by the amount of money coming in.
The resulting percentage is used by a lender to show how much money you have available to spend on a home loan.
Where Does It Come From?
Anything that you see on a credit report is added up to show what money is going out. These expenses might include car payments, student loans, and credit cards. This amount is divided into the amount of money that you have coming in each month before taxes. The resulting number is a percentage.
EXPENSES / INCOME = DTI RATIO
Where Is DTI Used?
DTI is part of the mortgage qualifying process. Each loan program requires different debt to income ratios. A lender uses this ratio to determine risk.