What is DTI?

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What is DTI and what role does it play in homebuying?


Simply put, DTI stands for debt-to-income ratio. Or, the total amount of debt you have compared to your gross monthly income. Although one debt might have a higher interest rate, they are all lumped together as one sum. 

When it comes to purchasing a home, DTI plays a vital role in your loan approval. It can affect the loan amount you’re approved for and the interest rate associated with your loan.  

Your DTI should be low to prove you are reliable and can take on the additional monthly debt of a mortgage payment. 

If you have a large sum of debt, don’t let that scare you. Devise a plan to tackle the debt. It might be a slow process, but it’s not impossible.  

Need help planning your strategy? Check out these tips:

  • Pay off large interest debts first. Then move to smaller interest items.  
  • If you have student loans, see if you can increase monthly payments to get them paid off sooner. 
  • Have some extra time during the week? Consider picking up a part time job. Although this might only be short-term, it allows you to put more money toward debt.
  • Consolidate your debts. 
  • Diligently keep track of your bills and pay them as quickly as possible to avoid late fees. 
  • Stop credit card spending, but don’t cancel credit cards. Purchase in cash as much as possible. 
  • Avoid dining out and cook at home. 
  • Shop with coupons, plan grocery trips ahead, and buy in bulk if it is financially beneficial. 
  • Schedule a weekly money transfer from credit to savings to start your down payment fund. 

Once your DTI is lowered and you’re ready to start the homebuying process, learn all you more about the process need to here.