Definition
The percentage of your gross monthly income that goes toward all debt payments. Lenders use DTI to determine how much you can afford to borrow. Most conventional loans require a DTI below 45–50%.
Related Credit & Qualification Terms
The percentage of your gross monthly income that goes toward all monthly debt obligations, housing payment plus credit cards, car loans, and student loans. Most lenders prefer a back-end ratio below 43–50%.
A detailed history of your borrowing and repayment behavior, compiled by the three major credit bureaus: Equifax, Experian, and TransUnion. Lenders pull your credit report to assess your likelihood of repaying the loan.
The home a borrower is moving out of when buying a new primary residence. If it's being converted into a rental, FHA generally requires the borrower to be relocating more than 100 miles for employment, a signed one-year lease, proof of the security deposit or first month's rent, and an appraisal confirming market rent and at least 25% equity before that rental income can offset the departing mortgage payment on the new loan's DTI.
A credit score ranging from 300 to 850, developed by Fair Isaac Corporation and used by most mortgage lenders. Scores of 740+ typically qualify for the most competitive rates; FHA loans are available down to 580 with a 3.5% down payment.
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