KNOWING MY ACCURATE DTI

[Anonymous]

DTI to me has always been rather bogus, as not nearly enough information is used.  As others have mentioned above, the "debt" portion of it considers what's on your CR.  So, someone with a mortgage has a greater DTI than someone paying and equal amount of rent when all other things are equal (for example).  As we all know, there are tons of expenses that don't show up on one's CR.  In fact, most of them including but not limited to utilities, car insurance, phone, cable/internet, etc. and then of course things that aren't "monthly" payments that are necessary like food, gas, etc.  I don't know, I just always find DTI to be pretty silly when very often it doesn't include the majority of where one's income actually goes.

If you were to go off of just my CR accounts and my stated income, my DTI would appear to be 19%.  If you take into account all of my monthly expenses, DTI is close to 40%. 

[Anonymous]

But isn't that why they look for people to be around 30%? As I'm sure Lenders already know about the unreported items like utilities and  also realize people have to eat. Being at or under should be an indicator that a person has sufficient income for said new Loan. 

The only real problem lies with a rather large unreported obligation, which could impact their ablity to repay if something were to cause a reduction in income or a large unexpected expense. People with hidden TL's for example, if that monthly payment were fairly high.

[Anonymous]

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@Anonymous wrote:

But isn't that why they look for people to be around 30%? As I'm sure Lenders already know about the unreported items like utilities and  also realize people have to eat. Being at or under should be an indicator that a person has sufficient income for said new Loan. 

The only real problem lies with a rather large unreported obligation, which could impact their ablity to repay if something were to cause a reduction in income or a large unexpected expense. People with hidden TL's for example, if that monthly payment were fairly high.

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I mean, no open loans on one's CR and zero reported CC balances (no minimum payments due) would put someone at 0% DTI, correct?  That would be 0% DTI regardless of income (as long as there's some income)...  I know tons of people that rent (more than pay a mortgage for example) and many of them are paying $1000, $1500, $2000/mo that shows up no where on their CR.  Such a person could be at 10% DTI on a high income or be at 50%-70% or higher DTI if they've got a low income and no one would know.  That's just talking rent and nothing like utilities or other expenses. 

I don't know, the whole DTI thing just seems bogus to me, although it must "work" to some degree or it wouldn't be used.

[HeavenOhio]

Rent is counted toward DTI. So is child support. Utilities generally aren't counted.

How to calculate your debt-to-income ratio (Wells Fargo)

[Anonymous]

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@HeavenOhio wrote:

Rent is counted toward DTI. So is child support. Utilities generally aren't counted.

How to calculate your debt-to-income ratio (Wells Fargo)

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"When you apply for credit, lenders evaluate your DTI to help determine whether you can afford to take on another payment."

But if your rent isn't on your CR (which for the majority, it isn't) it wouldn't be seen by lenders.  Sure from a MR standpoint if one is going for a mortgage or something that would likely be disclosed, but in the majority of cases since it isn't part of the CR it isn't considered.

[HeavenOhio]

I'm the last one to know anything about loans. But wouldn't the borrower provide rent and/or mortgage information like he would for a credit card application or a CLI request?

[Anonymous]

Yes. Whenever I've filled out an app, they always ask for Mortgage/Rent payment. However, I guess since Rent doesn't show up one could fib and not disclose it. A Mortgage can be verified via HP on CR, but not rent. So there probably have been some people who did not report their rent payment in in an attempt to skew DTI in their favor.

Although once the lender requests bank satements and sees a rather large monthly payment, it might raise a red flag.

[Anonymous]

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@Anonymous wrote:

Although once the lender requests bank satements and sees a rather large monthly payment, it might raise a red flag.

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Unless one pays their rent in cash.  I did that for all the years I paid rent.