Home Buying in Saint Paul>Question Details

msred00, Home Buyer in Saint Paul, MN

what does the debt to ratio mean?

Asked by msred00, Saint Paul, MN Mon Feb 25, 2013

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Sherri Sherpy’s answer
Debt-to-income ratio (DTI) specifically addresses the question: How much of a home can you qualify for?

Matt already explained the calculation below, but I would also add that any obligations that do not show up on your credit report, but indeed are a monthly obligation can be added in. For example, child support payments, alimony, new debt that has not shown up on your credit report yet.
0 votes Thank Flag Link Wed Feb 27, 2013
As mentioned before you are probably referring to the debt to income ratio (DTI).

This is comprised of all monthly debts showing on your credit report as well as the Principal, interest, taxes, and insurance (and HOA dues if applicable) and then measured as a % of your income.

For example if you make $4,000 a month and your total payments would be $2,000 then your DTI would be 50%

The importance of this depends on what type of loan programs you are looking at as well as the rest of the credit package. (Assets, FICO score, Loan to value ect)

If you are more specific about the loan program you are looking at I can give you a more specific answer.

Thanks,
-Matt
1 vote Thank Flag Link Mon Feb 25, 2013
It is the ratio of your long term debt to your qualifying income.

In simple terms it is your monthly debts (credit cards, student loans, car loans, projected mortgage payments) divided by your gross (before taxes are taken out) monthly income.

Different loan programs will allow different debt ratios, but for simplicity 45% is a general upper limit.

For more detail on what counts or doesn't count as debt, and what counts or doesn't count as income, just ask your favorite mortgage lender.
0 votes Thank Flag Link Tue Apr 16, 2013
Hi, msred00!
Do you mean Debt to Income ratio?? That's usually referred to as DTI. What that means is how the lender will compare your income to your debt. Then, they have a formula (depending on the mortgage program you're shooting for) that tells them, based on that information, how much you should be spending each month on a housing payment, therefore, telling them how much they should lend you.

Good luck!
0 votes Thank Flag Link Mon Mar 4, 2013
You're likely talking about the "debt to income" ratio.

Basically, you lender is wondering what percentage of your income is being used to service your debt. Hence the "debt" to "income" ratio.
0 votes Thank Flag Link Mon Feb 25, 2013
Alan May, Real Estate Pro in 60201
MVP'08
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I am assuming that you are referring to "debt to income ratio" which is usually asked for by lenders. This is pretty straight forward, as it is attempting to obtain a ratio for your income versus debt obligations.

I hope this helps.

Please contact me directly if you have any additional questions. I value the opportunity to assist you with all of your real estate needs.

Thank you!!

Robert Schuchman
"Experience You Can Trust"

Office - (651) 256-7400
Mobile - (651) 755-6710
Fax - (651) 698-7686
RE/MAX Results - Highland Park
2100 Ford Parkway Suite 201
Saint Paul, MN 55116
0 votes Thank Flag Link Mon Feb 25, 2013
This means the formula the lender uses to see how much you have going out for debt and then how much you have coming in as income . They have a specific percentage that you have to have in order to be able to get a loan! Hope that helps!
0 votes Thank Flag Link Mon Feb 25, 2013
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