This is the seventh installment in an ongoing series on mortgage basics. On my mortgage website, I cover a host of topics on my frequently asked questions page. Since this is the most popular page on my site, I thought it might be a nice way to begin my blog. You can find the entire list of FAQs here: Arizona Mortgage Pro FAQs. I will continue this series covering one topic per post.

What is a debt-to-income ratio (DTI) and why is it important?

Debt-to-income ratio is a fancy way of saying money in vs. money out. When a lender approves a mortgage, they want to know that the borrower has the ability to repay the loan.

Debt is calculated by adding the amount of monthly payments on things like credit cards, student loans, the proposed home payment applied for, other mortgages, car loans, personal loans, child support and alimony. Generally utilities are not included in the debt portion of this calculation.

Income is simply the amount of income you are making. There are all sorts of different calculations for income, depending on the type of income, but generally an employee shows 2 years of W2s and someone who is self-employed, using bonus income or receives commission will show two years of tax returns.

Different loan types (i.e. FHA, conventional, VA, USDA, non-conforming) have different acceptable ratios. To find out what your ratio is and which loan programs it would qualify you for, simply pick up the phone and call.

Thanks for reading my blog!

John Moran

Senior Loan Officer

3920 S Rural Rd #110 Tempe, AZ 85282

Direct: 480-300-4520

Fax: 602-904-7741

Website: www.azmortgagepro.com

NMLS#1059293 AZ#LO-0924433