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Debt-to-Income Ratio
Also known as: DTI, Debt-to-Income
Definition: The ratio of one’s debt relative to their income.
In mortgage lending, one’s DTI is expressed as a pair of percentages: a “front-end” ratio, as well as a “back-end” ratio. The front end ratio is the monthly housing expenses (PITI, or Principal, Interest, Taxes, Insurance) divided by the gross monthly income of the borrower. The back end ratio is the monthly housing expenses plus recurring debt expenses such as car loans, credit card payments, and so forth, divided by gross monthly income. Consequently, the back end ratio will always be greater than the front end ratio. The ratios are usually separated with a slash, for instance 28/32 would indicate a 28% front-end ratio and a 32% back end ratio. Mortgage loan products are often restricted to those who meet certain DTI ratios.