A primary factor in determining borrower eligibility for a home loan.
The debt-to-income ratio, also called DTI, is a primary factor in determining borrower eligibility for a home loan. It is used to establish mortgage affordability by comparing monthly gross income to monthly debts.
DTI includes two numbers: a front-end ratio and a back-end ratio. It is typically presented in this manner: 36/42 (or similar). The front-end ratio divides the borrower’s new mortgage payment by their gross income. The back-end ratio divides all borrower debt, including the new mortgage payment, by their gross income. The ratios need to fall below certain thresholds determined by specific loan programs in order to qualify for their loan products.