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.
References in periodicals archive ?
Separate from mortgage rates, inflation directly affects your debt-to-income ratio. This is because your other necessities and luxuries cost more as inflation rises.
Income was $60,000 for the non-white and $80,000 for the white, but the debt-to-income ratio was only 1% for the non-white shopper, while it was 38% for the white.
Currently, 8% of households in Canada have a debt-to-income ratio of more than 350% of their gross income.
The overall debt-to-income ratio, which includes mortgages, is expected to rise to 164 per cent in the same period.
Compared to FHA borrowers, their borrowers in 2015 had a slightly higher median credit score and a slightly lower median debt-to-income ratio, but the median borrower made no down payment at all.
[USPRwire, Thu Jan 01 2015] After 2011, the Canadian economy decelerated from the strong rebound after the recession which led to growing caution by consumers due to already high debt-to-income ratio and cooling housing market.
That's especially true if you don't quite fit the mold -- you don't conform to all the underwriting mandates on credit, income, debt-to-income ratio and other criteria.
The defaulting borrower could seek legal remedy if the bank approved the loan with little to no documentation and if the borrower's debt-to-income ratio is higher than 43 percent.
It's more of a task for individuals to prove their debt-to-income ratio without the proper documentation, even if they have a high net-worth and perfect credit.
Truth: Lenders look at your entire financial picture, including your assets, available cash flow, and debt-to-income ratio. They'll also review your housing expense-to-income ratio, which is a comparison of your expected monthly mortgage payment with your gross monthly income.
To ensure you're not setting yourself up for trouble, calculate your debt-to-income ratio. Here's how to do it: Divide your monthly loan repayments by your gross income, including your bonuses and other regular incentives.
Nationally, students who major in the humanities take home less money and have a significantly higher debt-to-income ratio, a key indicator of one's ability to repay, than those who major in engineering or computer science.