Hello, my name is Scott Flaherty, CEO, Lend Smart Mortgage. And welcome to another episode of Mortgage. Q And A. This episode deals with the question of what is DTI? Dti is your debt to income ratio and what that is is a number that represents your total debts, expressed as a percentage of your total gross monthly income.
Now, this would include your proposed housing payment on the loan that you're applying for. It would include other things that show up on your credit report, but it would not include things such as groceries or gas or car insurance, things that do not appear on your credit report that we pull. So let's take a look at an example of this. If your household income is, let's say $6,000 per month, and let's say you have a car payment of $500 per month. You also have $300 per month in student loan debts and another $100 per month in credit card debts, we would say that you have $2,400 per month in total obligations if you include a proposed mortgage payment of $1,500/month.
Divide that back into your $6,000 per month in income, and we would say your DTI equals 40%. So how does that factor into your mortgage loan? Well, the DTI is part of the three C's of mortgage underwriting, which are credit, collateral, and capacity. By the way, if you'd like to learn more about the three CS of underwriting, click on the link below to watch our video. We've done on that.
Your DTI is part of the capacity to repay the loan along with any other assets that you might have. So the lower DTI you have, the lower of a risk you are seen to a lender. Some products have a maximum allowable DTI, such as conventional products. Those typically 45% is the Max DTI allowed. Now, on other products such as government loans, FHA or VA, you could go all the way to a 55% DTI.
Sometimes that might allow you to purchase a little bit more of a home. So there's a lot of options out there available to you. And if you'd like to learn more about them or have questions, certainly contact one of our local professionals. They'd be glad to assist you. Also click subscribe down below to see more of our videos.
And as always, remember to be smart and choose Lend Smart.
Contact us at (651) 631-4919 or schedule a call and let our mortgage experts help you with your home loan.
All information is provided for informational purposes only. Please consult with a Loan Officer for qualification requirements. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Lend Smart Mortgage NMLS #4474 | AZ BK # 0908384