What Debt to income is

13 Replies

Its a ratio of debt payments and income for the same time period. 

E.g., if your debt service is $2000/mo and your income is $4000/mo, your debt to income ratio is 50%



With Commercial Loans, DTI will not be a factor with Asset bases loans or credit based loans. Reach out to me if you have more questions, I will be glad to help. Below is some basic info on DTI to help.

Debt to income ratio is the monthly payments you owe subtracted from the income coming in. Add all your monthly payments up, subtract your monthly income, and divide debts to income- Debts / Income

Example- If you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts(credit cards,small loans), your monthly debt payments are $2,000. ($1500 + $100 + $400 = $2,000.) If your gross monthly income is $6,000, then your debt-to-income ratio is 33 percent. ($2,000 is 33% of $6,000.) $2,000 / $6,000 = .33 (33%)


@David Robinson I'm planning to house hack with FHA, however, in my area the current market for FHAs is limited. So as a secondary plan I may finance a personal residence and do a live in flip then it would turn into an investment property.

In addition to that, if I am able to get an FHA I'm still unclear on how financing a second home would work (after the mandatory year of living there it would turn into an investment property). Obviously that's two loans and that would raise your DTI, making it hard to get approval for the second loan, no?

I’m still very new and trying to shove all of these “methods”, requirements and restrictions etc into my mind at once - it can get a little confusing lol thank you for responding.

@Jesse Collins

Hi Jesse I am a Loan Officer I deal with DTI all day long. Your debt to income is a ratio percentage of your debt against your current income...

For example if your monthly debt total being mortgage, car loan, credit cards, personal loan, student loans ect... you would take that amount and divide it by your monthly income, and that will give you your DTI ratio.

Example:

$3000 debt / $7000 income = 42.8 rounded = 43% DTI

This ratio is what lenders use to see how stable someone would be in paying back a home loan.