Glossary
DTI
Debt-to-income ratio: monthly debt payments divided by gross monthly income. Most lenders draw the line at 36–43%.
Lenders use DTI to judge whether you can absorb a new payment. Add up your monthly debt obligations — rent or mortgage, car, cards, student loans — and divide by your gross monthly income. Conventional mortgages generally want the total under 43%, with the strongest approvals under 36%. Lowering DTI, by paying down a balance or raising income, often moves your rate more than a few points of credit score.
Related terms
- Unsecured A loan that requires no collateral — approval rests on your credit profile and income.
- Escrow A holding account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment.
- Credit limit The maximum you can borrow on a revolving account like a credit card — a key input to your credit utilization ratio.
- Loan-to-value ratio The loan amount divided by the property's value, expressed as a percentage — a core number in mortgage and home-equity underwriting.
- Jumbo loan A mortgage larger than the conforming loan limit, which cannot be bought by Fannie Mae or Freddie Mac — so it carries stricter terms.
- Lien A legal claim against property that secures a debt — the lienholder can force a sale to collect if the debt goes unpaid.