What are LTV and DTI Ratios?

Posted by GoGSF | May 3, 2019 | mortgage loans, pre-approval, LTV, DTI

Which comes first?: Getting pre-approved and then searching for a home? Or, searching for a home and getting pre-approved once you found the home you love?

If you said getting pre-approved and then searching for a home, you are correct!  

Getting pre-approved before you start looking for a home lets you know how much you can afford to spend on a house. This will also help you narrow your home search to houses within your budget, give you an idea of how much you'll need for a down payment and help you identify budgeting goals to work towards. 

How is your loan amount determined? 

A lender will look at your credit, income assets and debts. 

They will also look at two important ratios: loan-to-value (LTV) and debt-to-income (DTI).

LTV expresses how much you're borrowing compared to the value of the home. A lower LTV is more favorable because it represents less risk to the lender. 


You can lower your LTV by increasing your down payment. 

DTI shows how much debt you have compared to your monthly income. This debt includes credit card bills, auto loans, alimony or child support and other regular monthly payments you make. 


The lower your DTI, the better chance you have to qualify for a loan. 

Before you start looking for a home, it is important to work with a lender to get pre-qualified. GSF Mortgage Corporation offers the Finance First Pre-Approval Program which gives you a fully underwritten credit and income verification before you go shopping for your perfect home.

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