Author Topic: Debt-to-Income (DTI) inconsistency  (Read 1828 times)

stick109

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Debt-to-Income (DTI) inconsistency
« on: June 20, 2014, 03:34:54 PM »
Something doesn't add up. Or I misunderstand what this number means. Let's look, for example, at this loan.

Revolving Credit Balance $212,306.00
Gross Income $8,542 / month
Debt-to-Income (DTI) 23.36% 

How is this possible? Just considering revolving credit alone DTI should be at least 207%!

brycemason

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Re: Debt-to-Income (DTI) inconsistency
« Reply #1 on: June 20, 2014, 03:37:45 PM »
DTI is a bit of a misnomer. It measures servicing capacity. So, it's the monthly payment to income ratio. It takes into account the minimum monthly payments from all those accounts (the $200k) as reported by the credit bureaus and then compares their sum to the monthly income. There are various types of debt people include/exclude beyond just revolving debts (installments, mortgages, cars, education being examples).