Terminology Tip: Debt-to-Income Ratio (DTI)

By: The Jean-Jacques Team

Terminology Tip: Debt-to-Income Ratio (DTI)

Tags: Debt-to-Income Ratio, Calculation, Borrower, Monthly Liabilities

The debt-to-income ratio, or DTI, is a calculation that determines how much a borrower can afford to pay every month toward their monthly debts.
 
The lender divides the amount of the borrower's monthly liabilities (including their new mortgage payment) by his or her pre-tax monthly income to determine whether the borrower would be able to repay their loan. The more debt the borrower has, the higher the DTI ratio, and the more potential risk the lender undertakes.

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