How do you calculate your debt to income ratio (DTI) for loss mitigation?

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If you're facing financial hardship and need to apply for loss mitigation, you'll need to know your debt to income ratio (DTI). This is a measure of how much of your monthly income goes towards paying your debts, such as mortgage, credit cards, car loans, and student loans. Your DTI can affect your eligibility and options for loss mitigation programs, such as loan modification, forbearance, or short sale. Here's how to calculate your DTI for loss mitigation in four simple steps.

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1 Gather your income and debt information

The first step is to gather your income and debt information. You'll need to add up all your gross monthly income from all sources, such as salary, wages, tips, commissions, bonuses, alimony, child support, and rental income. You'll also need to add up all your monthly debt payments, such as mortgage, property taxes, insurance, homeowners association fees, credit cards, car loans, student loans, personal loans, and alimony or child support payments. You can use your bank statements, pay stubs, tax returns, and credit reports to find these numbers.

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Anass Maksi

Chief @ BrightStar Protective Services | Security, Risk Management, Axon Taser Master Instructor & Training, Private Investigator, Fugitive Recovery Agent
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- Categorize income streams: Break down your income by source (salary, side hustles) to identify areas for potential growth. - Track hidden expenses: Consider often-forgotten expenses like subscriptions and dining out for a more accurate debt picture. - Automate the process: Budgeting apps can streamline data collection and analysis, saving you time and effort. - Regularly review: Revisit your income and debt figures regularly to stay on track and adjust your financial plan as needed.

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Alicia Odle

Policy Manager | Underwriter | Lending Manager | Process Developer | Project Manager | Audit and Risk Manager
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For FHA loans they work on a net income situation for loss mitigation. They consider all household expenses and take net income-all expenses paid and consider if any income is left over at the end of the month

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Jenifer O'Looney

Scrum Master, Agile, Lean Champion, Analyzes data, financials records,businesses, customers, quality and technology. Experienced with new client implementations.
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The calculation of DTI is program specific. Va is slightly different on utilities for instance. FHA require total debt of spouses even if they are not on the loan in a community property. Consulting the program details is very important

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2 Divide your debt by your income

The second step is to divide your total monthly debt payments by your total gross monthly income. This will give you your DTI as a percentage. For example, if your monthly debt payments are $2,000 and your monthly income is $5,000, your DTI is 40% ($2,000 / $5,000 x 100).

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Anass Maksi

Chief @ BrightStar Protective Services | Security, Risk Management, Axon Taser Master Instructor & Training, Private Investigator, Fugitive Recovery Agent
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- Pro tip: A DTI below 36% is generally considered good. This means your monthly debt payments are less than 36% of your gross monthly income. - Reducing your debt can significantly improve your DTI. Consider creating a budget to track your spending and identify areas where you can cut back.

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Jenifer O'Looney

Scrum Master, Agile, Lean Champion, Analyzes data, financials records,businesses, customers, quality and technology. Experienced with new client implementations.
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All program specific. Income must be looked at for continuity and calculations vary based type and frequency of Receipt. Check Program guidelines

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3 Compare your DTI to the guidelines

The third step is to compare your DTI to the guidelines for loss mitigation programs. Different lenders and programs may have different requirements and thresholds for DTI, but generally, the lower your DTI, the better. A DTI of 36% or less is considered ideal, while a DTI of more than 43% may make it harder to qualify for loss mitigation or get favorable terms. You can check with your lender or servicer to find out their specific criteria and options for loss mitigation based on your DTI.

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Anass Maksi

Chief @ BrightStar Protective Services | Security, Risk Management, Axon Taser Master Instructor & Training, Private Investigator, Fugitive Recovery Agent
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- DTI Thresholds are Starting Points: While a high DTI can limit options, lenders consider your entire financial picture. A strong credit score or steady income might offset a higher DTI. - Negotiate is Key: Don't be afraid to discuss your situation with your lender. Often, they have flexibility, especially if you've been a responsible borrower.

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Jenifer O'Looney

Scrum Master, Agile, Lean Champion, Analyzes data, financials records,businesses, customers, quality and technology. Experienced with new client implementations.
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Varies by program: very program specific. Check agency and portfolio program guidelines for more details. DTI is calculated slightly different for VA in particular

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4 Adjust your budget or seek help

The fourth step is to adjust your budget or seek help if your DTI is too high or you're struggling to make your payments. You may be able to lower your DTI by increasing your income, reducing your expenses, paying off some debts, or refinancing your mortgage. You can also contact a HUD-approved housing counselor or a nonprofit credit counselor for free or low-cost advice and assistance. They can help you evaluate your situation, explore your options, negotiate with your lender or servicer, and create a realistic plan to avoid foreclosure and improve your financial health.

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Anass Maksi

Chief @ BrightStar Protective Services | Security, Risk Management, Axon Taser Master Instructor & Training, Private Investigator, Fugitive Recovery Agent
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- Track your spending: Monitor your expenses for a month to identify areas where you can cut back. Small changes can add up quickly and free up money to pay down debt. - Prioritize high-interest debt: Focus on paying off debts with the highest interest rates first. This will save you money in the long run and help you get out of debt faster.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Anass Maksi

Chief @ BrightStar Protective Services | Security, Risk Management, Axon Taser Master Instructor & Training, Private Investigator, Fugitive Recovery Agent
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? Focus on a specific angle: Don't rehash the whole article. Share a unique perspective or lesson learned from your experience. ? Connect emotionally: Briefly weave in a personal anecdote to engage readers and illustrate your point. ? Offer practical tips: End with 1-2 actionable takeaways readers can implement based on your experience.

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How do you calculate your debt to income ratio (DTI) for loss mitigation?

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1 Gather your income and debt information

2 Divide your debt by your income

3 Compare your DTI to the guidelines

4 Adjust your budget or seek help

5 Here’s what else to consider

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