What does the abbreviation DTI stand for in mortgage lending?

In mortgage lending, the abbreviation DTI stands for Debt-to-Income ratio. This financial metric is crucial for assessing a borrower's ability to manage monthly payments and repay debts. The DTI ratio is calculated by taking the total monthly debt payments (including mortgage payments, credit card payments, car loans, and other obligations) and dividing it by the borrower's gross monthly income.

A lower DTI indicates that a borrower has a healthier financial status, demonstrating that a manageable portion of their income is allocated to debt repayment. Lenders often look for a DTI ratio that falls below a certain percentage—commonly around 43%—as this threshold can help determine the borrower's eligibility for a mortgage. This measure is vital for risk assessment in lending, guiding lenders in making informed decisions about loan approvals.

The other options do not accurately reflect the meaning of DTI in the context of mortgage lending. For instance, Deposit to Income and Debt-to-Interest ratios are not established measures used in the industry, while Debt-to-Inventory ratio does not pertain to individual finances or mortgage qualifications, underscoring the unique significance of the Debt-to-Income ratio in loan assessments.