PTI Cutoffs

The Enhanced Loan Amount Adjustment for Payment-To-Income Ratio (PTI) Cutoff requires the variables New Loan Payment and Combined Gross Monthly Income (GMI), and Payment to Income Ratio (as "PTI").

How To Calculate PTI

The PTI is calculated by dividing the New Loan Payment by the GMI.

New Loan Payment / GMI = PTI

For example, if the New Loan Payment is $650 and the GMI is $4,000, then the PTI ratio is 16.25%.

$650.00 / $4,000 = .1625

Applying the PTI Cutoff

The PTI Cutoff is the maximum PTI allowable. When the PTI exceeds the PTI Cutoff, the Approved Loan Amount must be reduced. First, we determine the Maximum Payment by multiplying the PTI Cutoff by the GMI.

PTI Cutoff x GMI = Maximum Payment Amount

For example, if the PTI Cutoff is 15% and the GMI is $4,000, then the Maximum Payment Amount is $600.

.15 x $4,000.00 = $600.00

The Maximum Payment becomes the "new" New Loan Payment.

Next, we calculate the new Approved Loan Amount using the New Loan Payment (Maximum Payment from above), Approved Term, and Approved Rate. This is done using the standard amortization formula. Assuming a Term of 60 months and a Rate of 11.15%, the loan amount is reduced to $27501 with a New Loan Payment of $600 and a PTI of 15%.

NOTE: Whenever the Approved Loan Amount has been reduced by the DTI Cutoff or the PTI Cutoff, Decision Manager will automatically run the new Approved Loan Amount through the Term and Rate processes to ensure that this new loan amount still qualifies for the Term and Rate assigned. If the Approved Term or Approved Rate is modified, the New Loan Payment is recalculated. Since the payment will be greater if either the Term or the Rate increase, the DTI and PTI processes will be rerun to ensure that the new ratios are still within the cutoffs assigned.