Talk:Debt-to-income ratio/Archives/2013

Technically a misnomer

This includes the portion of the payment which is principal as well as insurance, taxes, etc. That makes it very clearly a misnomer. However, I can't find anyone who has commented to this effect. I looked at the CFPB regulations on Qualified Mortgages which has a 43% DTI ratio requirement; they do not specifically use the term DTI but instead define the "fully amortizing payment" to include the principal and define "mortgage-related obligations" to include the insurance (in 12 CFR §1026.43). II | (t - c) 23:39, 1 July 2013 (UTC)

The lede already addresses this. It says, "Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance premiums as well. Nevertheless, the term is a set phrase that serves as a convenient, well-understood shorthand." That explains why the term is still used. You are right that revising the nomenclature would be nice, but that's natural language for you—sometimes well-established terms live on in somewhat fossilized fashion. — ¾-10 00:10, 2 July 2013 (UTC)

Some lenders use potential debt in the ratio calculation. For example if one has a Home Equity Line of Credit with a credit limit of $100000 and a $0 balance they will ignore the $0 balance and assign a debt of $1000/month (1% of the limit) to your monthly debt calculation. For some reason they do not do the same for your credit limit on your credit cards. This potential debt can hinder any attempts at refinancing a home loan until that credit line is reduced or canceled. The use of 1% per month implies a 12% interest charge on a home equity line. Dlucks (talk) 13:15, 30 October 2013 (UTC)

Technically a misnomer

This includes the portion of the payment which is principal as well as insurance, taxes, etc. That makes it very clearly a misnomer. However, I can't find anyone who has commented to this effect. I looked at the CFPB regulations on Qualified Mortgages which has a 43% DTI ratio requirement; they do not specifically use the term DTI but instead define the "fully amortizing payment" to include the principal and define "mortgage-related obligations" to include the insurance (in 12 CFR §1026.43). II | (t - c) 23:39, 1 July 2013 (UTC)

The lede already addresses this. It says, "Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance premiums as well. Nevertheless, the term is a set phrase that serves as a convenient, well-understood shorthand." That explains why the term is still used. You are right that revising the nomenclature would be nice, but that's natural language for you—sometimes well-established terms live on in somewhat fossilized fashion. — ¾-10 00:10, 2 July 2013 (UTC)

Some lenders use potential debt in the ratio calculation. For example if one has a Home Equity Line of Credit with a credit limit of $100000 and a $0 balance they will ignore the $0 balance and assign a debt of $1000/month (1% of the limit) to your monthly debt calculation. For some reason they do not do the same for your credit limit on your credit cards. This potential debt can hinder any attempts at refinancing a home loan until that credit line is reduced or canceled. The use of 1% per month implies a 12% interest charge on a home equity line. Dlucks (talk) 13:15, 30 October 2013 (UTC)