Qualifying

DTI (Debt-to-Income Ratio)

DTI, or debt-to-income ratio, compares your monthly debt payments to your gross monthly income, shown as a percentage. Lenders use it to judge how much new payment you can handle. There are two versions: front-end counts housing only, and back-end counts all your monthly debts plus the housing payment.

To picture it, take your total monthly debt payments and divide by your gross monthly income. If you earn $8,000 a month and your debts plus the new house payment total $3,400, your back-end DTI is about 43%. Lower percentages usually mean more breathing room in your budget and more confidence for a lender.

Guidelines vary by loan program and the rest of your file, so there isn’t one universal cutoff. Strong credit, a bigger down payment, or extra savings can give some flexibility. If your DTI is tight, paying down a debt or holding off on new loans before you buy can make a real difference. You can estimate yours with my DTI calculator.

Related terms

LTV (Loan-to-Value Ratio)

LTV, or loan-to-value ratio, compares your loan amount to the home's value, shown as a percentage. If you borrow $360,000 on a $400,000 home, your LTV is 90%. A lower LTV means more equity, which can affect your rate, your mortgage insurance, and the programs you may qualify for.

Pre-Approval vs. Pre-Qualification

A pre-qualification is a quick estimate of what you may borrow, based on info you share. A pre-approval goes further: the lender verifies your credit, income, and assets, so it carries more weight with sellers. Think of pre-qualification as a starting point and pre-approval as the stronger, documented version.

Conventional Loan

A conventional loan is a mortgage that isn't backed by a government program like FHA or VA. It often needs solid credit, but it can allow down payments as low as 3% and lets you drop mortgage insurance once you build enough equity. It's the most common loan type for many buyers.

Last updated: June 5, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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