Debt-to-Income Ratio (DTI)

DTI compares everything a borrower owes each month, from car loans to mortgages, with their income before taxes. Conventional lenders use it to approve the BRRRR refinance, and it is often what stops an investor from repeating: each new mortgage adds debt faster than the rent counts as income.

Conventional underwriting commonly credits only part of the rent, often 75%, to allow for vacancy and costs. On the default deal, 75% of $4,400 is $3,300, against a payment with taxes and insurance of about $3,266. The rental roughly breaks even on paper, even though it produces cash in practice.

Loans that look only at whether the rental covers its own payment, measured by the debt service coverage ratio, never ask for DTI. Many investors move to them once conventional DTI limits are reached, usually at a higher rate.

Further reading: Debt-to-Income Ratio (DTI) on Wikipedia.