Mortgage Glossary
DTI (Debt-to-Income Ratio)
Borrower’s monthly debt obligations divided by gross monthly income. The core ability-to-repay metric on owner-occupied lending.
What is DTI?
DTI stands for Debt-to-Income ratio. It expresses a borrower’s total monthly debt obligations as a percentage of gross monthly income. The denominator is pre-tax income; the numerator is the sum of every reported monthly debt — the proposed housing payment, other mortgages, auto loans, student loan minimums, credit card minimums, and any court-ordered alimony or child support.
On most Qualified Mortgage products, DTI is capped at 43%. On non-QM Prime Time, the cap is 50% — with a stretch to 55% if the borrower has $3,500 in monthly residual income on a primary residence at LTV of 80% or lower. Documentation of income depends on the doc path (full doc, bank statement, 1099, asset utilization, P&L only, written VOE).
On DSCR loans, DTI is not calculated — the property’s rental income qualifies the loan, not the borrower’s personal income. This is why DSCR programs are popular with self-employed investors whose tax returns understate their true earning power.
How DTI applies at Total Quality Lending
DTI is calculated only on Prime Time (TQL’s owner-occupied and second-home program). The max is 50%, stretching to 55% with $3,500 monthly residual on primary at ≤80% LTV. DTI is NOT calculated on DSCR, Multi-Unit DSCR, or Foreign National DSCR loans — those programs qualify on property income.
FAQs
What's the max DTI on a TQL Prime Time loan?
Max DTI on Prime Time is 50%. It can stretch to 55% with $3,500 residual income on a primary residence at LTV ≤ 80%. DTI requirements vary by occupancy, doc path, and FICO tier.
Do DSCR loans require DTI?
No. That's the entire point of DSCR financing. The loan qualifies on the property's rental income via the DSCR ratio (Monthly Rents ÷ PITIA). Borrower tax returns, W-2s, and DTI are not part of underwriting.
How is DTI calculated?
DTI = Total Monthly Debt Obligations ÷ Gross Monthly Income. Total monthly debt includes the proposed housing payment (PITIA on the subject property), all other reported mortgages, car loans, credit card minimums, student loan minimums, alimony, and child support. It does NOT include utilities, groceries, or other discretionary expenses.
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