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What is DTI for a mortgage?
Debt-to-income ratio (DTI) compares a borrower's total monthly debt obligations, including the proposed housing payment, with their qualifying gross monthly income, expressed as a percentage. Mortgage lenders use DTI to judge whether a borrower can manage the new payment alongside existing obligations.
DTI comes in two versions. Front-end (housing) DTI counts only the housing payment; back-end DTI adds car loans, minimum credit card payments, student loans and other recurring debts. When people say DTI, they usually mean back-end.
Acceptable DTI depends on the program and the rest of the file. On alt-doc loans, the income side of the ratio is whatever the documentation method produces. DSCR loans qualify on the property's rent and don't use DTI.
$4,500 of monthly debts, including the new PITIA, against $12,000 of monthly income is a 37.5% DTI.
