Debt-to-Income (DTI) is a lending term which describes a person’s monthly debt load as compared to their monthly gross income. It is a huge factor in determining your credit worthiness. Mortgage lenders use Debt-to-Income to determine whether a mortgage applicant can maintain payments a given property. DTI is used for all purchase mortgages and for most refinance transactions.
It can be used to answer the question “How Much Home Can I Afford?”
Debt-to-Income does not indicate the willingness of a person to make their monthly mortgage payment. It only measures a mortgage payment’s economic burden on a household.
Most mortgage guidelines enforce a maximum Debt-to-Income limit.