What is "DTI" DEBT TO INCOME RATIO?

Kuljinder Singh Tatla Real Estate and Mortgage Broker in Riverside California answer mortgage related questions

Want to know what is DTI

Your debt-to-income ratio is a percentage that tells lenders how much money you spend versus how much money you have coming into your household. You can calculate your DTI by adding up your monthly minimum debt payments and dividing it by your monthly pre-tax income.

When you apply for a mortgage, you’ll need to meet maximum DTI requirements so your lender knows you’re not taking on more debt than you can handle. Lenders prefer borrowers with a lower DTI because that indicates less risk that you’ll default on your loan.

Your lender will look at two different types of DTI during the mortgage process: front-end and back-end.

FRONT END DTI

Front-end DTI only includes housing-related expenses. This is calculated using your future monthly mortgage payments, property taxes and homeowner’s insurance.

BACK END DTI

Back-end DTI includes all your minimum required monthly debts. In addition to housing-related expenses, back-end DTIs include any required minimum monthly payments your lender finds on your credit report. This includes debts like credit cards, student loans, auto loans and personal loans.
Your back-end DTI is the number that most lenders focus on because it gives them a more complete picture of your monthly spending.

What are the Basic Types of Loans?

Conventional / Fixed Rate Mortgage. Conventional fixed rate loans are a safe bet because of their consistency — the monthly payments won't change over the life of your loan
Interest-Only Mortgage
Adjustable Rate Mortgage (ARM)
FHA Loans
VA Loans
Combo / Piggyback
Balloon
Jumbo