Debt to Income

Traditional banks typically quantify a borrower’s ability to adequately repay a loan based on a Debt-to-Income (DTI) Ratio. This calculation combines all of a borrower’s monthly debt payments (including that of the proposed loan) and expresses this as a percentage of the borrower’s monthly income which equals the DTI Ratio. The lower the % of debt to income the easier it is for the borrower to pay the monthly payments and thus the safer the loan in the eyes of the bank (and vice versa on a higher DTI). A bank will typically look for a DTI to be no higher than 43% for a conventional loan.