Mortgage Terminology: Loan-to-Value and Debt-to-Income

By Toll Brothers 2 minute read

Last updated on September 19th, 2023

Carefully managing your credit history and having a good credit score are both critical factors when applying for a mortgage. There are, however, two other qualifying standards that may not get as much buzz, but are just as important in the eyes of mortgage lenders – loan-to-value (LTV) and debt-to-income (DTI).

Knowing these two numbers is just as important as knowing your credit score. They’re a good indicator of how much you can afford and will help paint your overall financial picture. Backed by years of experience and mortgage expertise, we’ve asked members of Toll Brothers Mortgage to break down this critical mortgage terminology so you can better understand why these factors are vital to the mortgage process:

Loan-to-Value (LTV)


LTV is the ratio between the amount of money you borrow and the value of your home.


If the purchase price is $250,000 and the down payment is $50,000, then the loan amount would be $200,000. This equals an LTV ratio of 80% ($200,000 divided by $250,000).

Why Your LTV Matters:

Generally, buyers with lower LTV ratios will qualify for lower mortgage rates. These buyers are considered “less risky” because they have more equity in their homes and are less likely to default on their mortgage.

The LTV ratio also determines whether or not private mortgage insurance (PMI) is required. For Conventional loans, if an LTV is 80.01% or higher, PMI is necessary. This helps protect the lender in case a buyer defaults on their mortgage. You can put down as little as 3.5% with an FHA loan; but again, you’ll have to pay mortgage insurance.

Debt-to-Income (DTI)


DTI is the amount of your expected monthly housing payment plus other recurring debts compared to your gross monthly income.


Calculating your DTI is something you can easily do yourself and it only takes a few minutes. Here’s an example:

  1. First, add ALL of your recurring monthly debts. For qualifying purposes, this is the amount you pay for bills that are on your credit report like credit cards, student loans, car leases and installment loans. It excludes expenses such as car insurance, utilities and phone bill.. For instance:
  2. Mortgage (principal, interest, taxes, insurance, homeowners association fees) – $2,750

     + Car loans – $365

     + Student loans – $250

     + Credit card debt – use minimum payment of $100

     = Total Monthly = $3,465

  1. Next, determine your gross income. For now, we’ll say it’s $120,000 per year or $10,000 per month.
  2. Lastly, divide your housing payment and total recurring monthly debts by your monthly gross income to get your DTI ($3,465/$10,000 = 0.3465. Your DTI of 34.65%)

Why Your DTI Matters:

Lenders use this ratio as one way to analyze your ability to manage payments. There’s no magic number that lenders look for, but the lower the DTI the better your chances are of being approved for a loan. Keep in mind different loan programs have various DTI standards and this is only one of the many tools lenders use today.

If you have any questions regarding mortgage terminology or financing, please visit the Toll Brothers Mortgage.

Toll Brothers Mortgage, a subsidiary of Toll Brothers, contributed to this story.

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Embracing an unwavering commitment to quality and customer service, Toll Brothers currently builds in over 60 markets in 24 states nationwide, and is a publicly owned company with its common stock listed on the New York Stock Exchange (NYSE: TOL). In 2024, Toll Brothers marked 10 years in a row being named to the Fortune World's Most Admired Companies™ list.* Toll Brothers has also been named Builder of the Year by Builder magazine and is the first two-time recipient of Builder of the Year from Professional Builder magazine. For more information, visit From Fortune, ©2024 Fortune Media IP Limited. All rights reserved. Used under license.


    1. Selenita Flores says:

      Hi! can somebody speak Spanish contact me please,we really need information above the proyect you offered thank you!!

      • Toll Brothers says:

        Hi Selenita, can you please share where the project is located? Once we know the state, city, and community that you are referring to, we will be able to find a qualified associate to talk with you more about it. Thanks!

    2. Mike says:

      Are you required to use Toll Brothers financing or can I use my own lender?

      • Toll Brothers says:

        Hi Mike, you can use another lender when buying a Toll Brothers home, but we encourage going through our own mortgage company – TBI Mortgage. You can learn more about mortgage FAQs here –

        Also, please feel free to fill out a form to learn more about mortgages with Toll Brothers here –

        Let us know if there’s anything else we can help with!

    3. Lauren says:

      where is the application?

      • Toll Brothers says:

        Hi Lauren, we encourage you to visit TBI Mortgage’s website,, and contact our team to learn more about the application process. They will be able to share more information. We hope this helps answer your question, thanks!

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