What's Included In My Debt-To-Income (DTI) Ratio? How To calculate it?

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Mortgage and Lending with Taylor Morrison Home Funding NMLS#: 1054841

What is included in my Debt-To-Income (DTI) Ratio?

This is a common question asked by borrowers, and rightly so.  With credit scores so often being the focus of mortgage loan qualification, people often forget that their DTI ratio is even more important. This is especially true now with the passing of QM dictating the max conventional DTI ratio to be 43%.

Basically all recurring monthly debts that show up on your credit report will factor into your DTI calculation since they are a recurring part of your budget.
This includes: mortgage payments (all inclusive with principle, interest, taxes and insurance - PITI), installment loans, student loans, the minimum payment of credit cards, co-signed loans, child support, and any other monthly obligation that happens to be on your credit report.
However, there are exceptions for loans that are nearly paid off and only have few months remaining to pay off.
This is why when qualifying for a loan, we look at your credit report and ask for debt and income documentation in order to satisfy these requirements and be certain of the loan amount that you can qualify for.
Since the passing of the QM regulation, for all conventional loans the max DTI ratio is 43%.  Knowing this makes it fairly simple for you to roughly calculate how much you can qualify for on your own by simply adding up your monthly obligations yourself and dividing by your gross monthly income.
For example: $750 monthly debt divided by $3200 gross monthly income equals .234 or 23% DTI Ratio.
You can also use the affordability calculator on the right hand side of my website if you like.

I hope that clears it up for you. If not, please feel free to give me a call and I can answer your questions personally!

 

Michael Marroquin
Loan Officer
NMLS# 1054841
6787 W Tropicana Ave. Suite 264
Las Vegas, NV 89103
Tues – Thurs: 9 – 5:30     (702) 696-9900 ext. 217
Mon, Fri, Sat, & after hours:    (702) 527-8332
mmarroquin@ValleyWestMortgage.com

 

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