What does DTI stand for in mortgage terms?

DTI stands for Debt-to-Income ratio, which is a crucial financial metric used by lenders to assess a borrower’s ability to manage monthly payments and repay debts. The DTI ratio is calculated by dividing the total monthly debt payments by the borrower’s gross monthly income. This percentage helps lenders evaluate the risk associated with lending money to a borrower.

A low DTI indicates that a borrower has a manageable level of debt compared to their income, which is generally viewed favorably by lenders, enhancing the borrower’s chances of loan approval. Conversely, a high DTI ratio might signal that a borrower may struggle to make their payments, leading to potential challenges in securing financing.

The other options refer to terms that are not standard in mortgage lending. While “Debt-to-Investment”, “Debt-to-Interest”, and “Debt-to-Total” are not commonly used or defined metrics in assessing creditworthiness in the context of mortgage lending, the DTI ratio is widely recognized and used by financial institutions to make lending decisions.