Debt-to-Income Ratio

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Debt-to-Income Ratio

The amount of an individual or company's gross income that it spends on debt service as a percentage of its total gross income. The higher the DTI is, the less likely it is that the individual or company will be able to repay debt. As a result, financial institutions use the DTI in informing decisions on whether or not to make loans. Often, the "debt" in the term refers to all liability payments (such as employee wages, taxes, and utility bills) and not simply to debt.

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* Growing numbers of loans have multiple indications of serious future risk of nonpayment -- combinations of low credit scores of 640 or less and DTI ratios that exceed 50 percent.

Homebuyers with heavy debt might find it tougher to get loan

- Apply relaxed DTI ratios for those who temporarily owe two mortgages before the sales of old homes, the newly-married and young adults

Policy Issue

After all, not all borrowers with DTI ratios of 44 and higher are created equal--and neither are all non-QM loans.

Non-QM loans' cool reception

Younger families had much higher DTI ratios throughout the time series.

Introduction

The government wants to see the newly adjusted LTV and DTI ratios help people borrow money with lower interest rates from financial institutions.

Gov't urged to curb soaring household debt

Places with the highest DTI ratios are likely to be those with the highest prevailing home prices.

The evolution of household leverage during the recovery

Most important: Postpone your purchase until your DTI ratios tell you -- yes, you can afford the house you want and lenders won't reject you out of hand.

A look at the red flags bankers see

(121) Most of the negative comments were focused on the original proposal's down payment requirement, LTV ratios, and DTI ratios. (122) Many commenters argued that the proposed QRM definition was too narrow, especially with respect to the LTV and DTI requirements, because it disadvantaged first-time homebuyers and low- and moderate-income persons.

The exception that ate the rule: why QRM should not equal QM

However, borrowers with poor credit profiles (such as low-to-moderate-income households that tend to have low credit scores and/or higher DTI ratios) may find their financing options more limited due to QM standards.

Housing market overview: challenges to the housing recovery

They also wouldn't commit to borrower criteria--minimum credit scores, DTI ratios, etc.--saying instead that "We do a full analysis on the individual and make loans based on the individual.

LSA finance woes: crippling the industry: if the brand is listed in Vref or Bluebook, credit is usually available at reasonable rates. Want a loan for an odd make or commercial use? Fugetaboutit

In this section we perform an empirical analysis of the potential determinants of default identified in the previous section, including falling house prices, labor income shocks, and high DTI ratios. Because a loan that is prepaid is no longer at risk of default, we also investigate prepayments in a competing risks framework.

Reducing foreclosures: no easy answers

Recent college graduates, saddled with large student loan debt, will also have to postpone home purchases while getting their DTI ratios under the cap.