DTI

Understanding Debt-to-Income Ratios

Effectively helping your clients manage their debt-to-income (DTI) ratios can improve their chances of getting favorable loan terms.

Let’s discuss the debt-to-income ratio, why it matters, 

Why is the Debt-to-Income Ratio Important?

A lower DTI ratio suggests that a borrower has a manageable debt level relative to their income, which can positively impact their loan eligibility and interest rates. On the flip side, a high DTI ratio may indicate that a borrower is overleveraged, increasing the risk for lenders.

Therefore, maintaining a healthy DTI ratio is essential for borrowers seeking favorable loan terms.

How is DTI calculated? By taking the total monthly debt payments and dividing them by the gross monthly income.

Key DTI Stat to Know:

A debt-to-income ratio under 36% makes mortgage approval easier, while a ratio above 43-50% indicates that debt levels are too high compared to income.