A debt-to-income (DTI) ratio is a crucial metric in the financial world, particularly for prospective homebuyers and lenders. It measures the percentage of a buyer's monthly income that goes towards paying debts.
This ratio helps lenders understand the portion of the buyer's income that is already committed to existing debts, providing insight into the buyer's financial health and ability to manage additional loan payments.
Lenders use the DTI ratio to assess the borrower's risk and determine what portion of the buyer's income remains available after all monthly obligations, such as mortgages, car loans, credit card payments, and other debts, are met. The calculation of the DTI ratio involves dividing the total monthly debt payments by the gross monthly income.
A lower DTI ratio indicates a healthier balance between debt and income, suggesting that the buyer is in a better position to take on additional financial commitments. Conversely, a higher DTI ratio may signal to lenders that the buyer has a significant portion of their income already tied up in debt payments, potentially making them a higher risk for new loans.
Generally, lenders prefer a DTI ratio of 36% or lower, though some may accept higher ratios depending on other factors such as credit score, down payment, and overall financial stability.
Interest Rates Have Increased
Borrowers May Not Qualify
Due to DTI Calculation
Time To Consider
NO RATIO PROGRAM
No DTI calculation
No Income on Application
No Employment on Application
No Tax Returns
No W2s
No 1099
Only Required to Have
as low as 20% Down Payment
80% LTV = 720+ FICO - 12 Months Reserves
75% LTV = 680-719 FICO - 9 Months Reserves
65% LTV = 660-679 FICO - 9 Months Reserves
Funds for Down Payment
Closing Costs
Prepaid’s
Reserves
Primary Residence
Second Home
Purchase
Refinance
Minimum Loan $200,000
