Home / Glossary / Debt-to-Income Ratio (DTI)
Debt-to-Income Ratio (DTI)
The percentage of gross monthly income used to pay debt obligations, a key metric in conventional lending.
Definition
The debt-to-income ratio compares your total monthly debt payments (including the proposed mortgage) to your gross monthly income. Conventional lenders typically require DTI below 43-50%. DTI is calculated by adding all minimum monthly debt payments — mortgages, car loans, student loans, credit card minimums, and child support — and dividing by gross monthly income. For real estate investors with multiple properties, DTI can become a limiting factor as each additional mortgage adds to the debt side of the equation. This is precisely why DSCR loans were created — they qualify the property's income rather than adding to the borrower's personal DTI.
How This Relates to DSCR Loans
DSCR loans do not use borrower DTI for qualification. This is their primary advantage — investors can acquire properties regardless of how many mortgages they already carry.
Related Terms
DSCR (Debt Service Coverage Ratio)
A ratio that measures whether a property's rental income covers its debt payments.
Non-QM (Non-Qualified Mortgage)
A mortgage that doesn't meet the Consumer Financial Protection Bureau's qualified mortgage standards.
Underwriting
The process by which a lender evaluates the risk of a loan application before approving it.
Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
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