HLG040 What is your debt-to-income ratio and why does it matter? (868 words)

This article explains the importance of your debt-to-income (DTI) ratio to your bank when assessing your loan application. With the use of a case study, we delve into your debt-to-credit ratio, your loan valuation ratio and Lenders Mortgage Insurance (LMI). An excellent article for first time home loan applicants.

Applying for a home loan can take on almost mystical proportions, with most Australians unsure of just how much money they can borrow. As a result, they often make the mistake of trying to secure too much money, only to be knocked back.

Most people understand they need a deposit, usually 20 per cent or more of the purchase price, and to provide details of their income and credit history to secure a loan. Still, too often, they overlook the bank's need to conform to certain set debt ratios.