Definition of Debt-to-Income Ratio:

Debt to Income Ratio calculation (DTI):

Debt-to-income ratio – also referred to as DTI, back-end ratio or bottom-end ratio. It’s the total of all monthly debt payments including the proposed housing expense (but not living expenses like food and utilities) divided by monthly gross (before tax) income. Front-end ratio – defined as the total proposed housing expense divided by your gross monthly income. Total housing expense includes mortgage principal and interest, property tax, hazard insurance (fire insurance) and, if applicable, extras like homeowner association dues (Orange County HOA), mortgage insurance (PMI), and flood insurance.

Here is an example of Debt Ratio for Orange County:

  • Borrower’s Gross Monthly Income is $12,000.00

  • Borrower’s new monthly payment is $2,500.00

  • Borrower’s new property taxes, insurance are $800.00

  • Borrower’s new homeowners insurance and HOA are $200.00

  • Borrower’s total other payments (excluding utilities/food) $600.00

  • Total new payments = $4,100.00

  • Debt-to-Income-Ratio is 34% (4,100/12,000)

Note: The maximum debt ratio that most lenders are willing to lend at without exception is 40%



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