Debt to Income Ratio (DTI)
What is DTI (Debt to Income Ratio)?
DTI is the calculation that determines how much of a mortgage someone qualifies for. You arrive at the number by dividing your gross monthly income by your total number of monthly debt payments (including the new mortgage).
Typically, 45% is the maximum allowed DTI, but sometimes you can get up to 50% for Conventional loans, and even 55% on non-Conventional mortgage products (like FHA and VA), if the Automated Underwriting System (AUS) allows it.
So for example, if your gross monthly income is $10,000/month, your total debt payments cannot be greater than $4,500 (maybe $5,000). So in this scenario, if you had a $400/month car loan, and $800/month in student loan payments, that means that your new mortgage payment would have to be $3,300/month or less.