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When you [shop for insurance](https://www.offermarket.us/insurance?ref=content-am-best-ratings), whether it's **Landlord Insurance** or **Fix and Flip Insurance**, it's important to choose an insurer that is financially strong and able to meet its obligations detailed in your insurance policy.

Many private lenders, including [OfferMarket Capital](https://www.offermarket.us/loans?ref=content-am-best-ratings), have a minimum AM Best rating requirement for [DSCR Loans](https://www.offermarket.us/blog/dscr-loan-program) and [Fix & Flip Loans](https://www.offermarket.us/blog/fix-and-flip-loans). 

At OfferMarket, we require all policies be written through insurers with a minimum of A- / VIII. As you will see from the ratings tables below, that means the insurer must be considered to have an "Excellent" ability to meet their ongoing insurance obligations, and their policyholder surplus must be at least $100 million.

## What is AM Best?

AM Best is a financial services rating agency that specializes in assessing the financial strength and size of insurance companies.

## Financial Strength Rating (FSR) Scale

The Financial Strength Rating is a statistical assessment of an insurer's ability to meet their ongoing insurance obligations. AM Best assigns a financial strength rating from A++ (Superior) through D (Poor). Our private lending division, OfferMarket Capital, requires a minimum FSR of A- (Excellent).

<div style="display: grid; grid-template-columns: repeat(1, minmax(0, 1fr)); overflow: auto; white-space: nowrap;">
<table>
<thead>
  <tr>
    <th>Rating<br>Categories</th>
    <th>Rating<br>Symbols</th>
    <th>Rating<br>Notches*</th>
  </tr>
</thead>
<tbody>
  <tr>
    <td>Superior</td>
    <td>A+</td>
    <td>A++</td>
  </tr>
  <tr>
    <td>Excellent</td>
    <td>A</td>
    <td>A-</td>
  </tr>
  <tr>
    <td>Good</td>
    <td>B+</td>
    <td>B++</td>
  </tr>
  <tr>
    <td>Fair</td>
    <td>B</td>
    <td>B-</td>
  </tr>
  <tr>
    <td>Marginal</td>
    <td>C+</td>
    <td>C++</td>
  </tr>
  <tr>
    <td>Weak</td>
    <td>C</td>
    <td>C-</td>
  </tr>
  <tr>
    <td>Poor</td>
    <td>D</td>
    <td>-</td>
  </tr>
</tbody>
</table>
</div>

<br>

## Financial Size Category (FSC)

The Financial Size Category is a measure of **Policyholder Surplus** which is calculated by subtracting the insurance company's liabilities from its assets. The greater the policyholder surplus, the better able the insurance company can withstand adverse economic conditions and remain solvent.

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<table>
<thead>
  <tr>
    <th>Class</th>
    <th>Policyholder Surplus ($ Millions)</th>
  </tr>
</thead>
<tbody>
  <tr>
    <td>I</td>
    <td>Less than 1</td>
  </tr>
  <tr>
    <td>II</td>
    <td>1 to 2</td>
  </tr>
  <tr>
    <td>III</td>
    <td>2 to 5</td>
  </tr>
  <tr>
    <td>IV</td>
    <td>5 to 10</td>
  </tr>
  <tr>
    <td>V</td>
    <td>10 to 25</td>
  </tr>
  <tr>
    <td>VI</td>
    <td>25 to 50</td>
  </tr>
  <tr>
    <td>VII</td>
    <td>50 to 100</td>
  </tr>
  <tr>
    <td>VIII</td>
    <td>100 to 250</td>
  </tr>
  <tr>
    <td>IX</td>
    <td>250 to 500</td>
  </tr>
  <tr>
    <td>X</td>
    <td>500 to 750</td>
  </tr>
  <tr>
    <td>XI</td>
    <td>750 to 1,000</td>
  </tr>
  <tr>
    <td>XII</td>
    <td>1,000 to 1,250</td>
  </tr>
  <tr>
    <td>XIII</td>
    <td>1,250 to 1,500</td>
  </tr>
  <tr>
    <td>XIV</td>
    <td>1,500 to 2,000</td>
  </tr>
  <tr>
    <td>XV</td>
    <td>2,000 or greater</td>
  </tr>
</tbody>
</table>
</div>

### How to calculate Policyholder Surplus

Assets - Liabilities = Policyholder Surplus

### What is Policyholder Surplus

Policy holder surplus is the liquidation value of an insurance company. If you were to sell all assets and repay all liabilities, the policyholder surplus is what would be left. In business, this is is otherwise known as **book value**.

---

[![Shop 40+ carriers landlord insurance.jpg](https://cms.offermarket.us/uploads/Shop_40_carriers_landlord_insurance_974b0d370b.jpg)](https://www.offermarket.us/insurance?ref=content-am-best-ratings)

---

## Protect and grow your portfolio with OfferMarket

OfferMarket is a real estate investing platform focused on serving rental property investors, specifically 1-4 unit residential properties. Our mission is to help you build wealth through real estate.

☂️ **[Landlord Insurance](https://www.offermarket.us/insurance?ref=content-am-best-ratings)** rate shopping platform specialized in landlord insurance that meets DSCR loan guidelines</br>
🏚️ **[Off Market Properties](https://www.offermarket.us/insurance?ref=content-am-best-ratings)** marketplace featuring hundreds of exclusive and off market deals posted by wholesalers, tired landlords and distressed sellers.</br>
💰 **[Private Lending](https://www.offermarket.us/loans?ref=content-am-best-ratings)** featuring instant quotes and a simple, low cost, transparent borrowing experience for DSCR loans, Fix and Flip loans and Slow Flip loans.</br>
💡 ***[Insights](https://www.youtube.com/channel/UCRoNHXFVgI36SV0QQpyf9fw)** regularly published to provide you with a knowledge advantage.

---

AM Best ratings assess the financial strength and size of insurance companies, minimums of which are often required by private lenders.

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AM Best Ratings | OfferMarket

AM Best Ratings

<br>

## Seller needed to sell fast

<br>

If you need to sell your house fast, we are here to help. Let's meet a seller who received multiple competitive offers within 2 days of launching his Get Offers campaign and closed his sale in just 25 days.

<br>

## Home in poor condition

<br>

Dan from Ocean City, MD had a second home in Parkville, MD in poor condition that he needed to sell fast. He understood that the most likely buyer for his house would either be a fix and flip or a rental property investor, and he wanted to get the best possible offer from verified buyers.

<br>

## Sell house fast for most money

<br>

Dan just wanted to sell his house fast for the highest possible net proceeds -- he didn't want to deal with coordinating repairs, interviewing agents, endless showings and post-inspection negotiations, and he certainly didn't want to handle everything himself in a For Sale By Owner process. 

<br>

Dan did his research and found OfferMarket.

<br>

**Day 1:** Dan filled out our [Get Offers form](https://www.offermarket.us/sell).

<br>

**Day 3:** Free professional photography and a 3D home tour was completed and Dan now had a beautiful listing to [showcase his property](https://www.offermarket.us/listings/22-Maple-Hollow-Ct-Parkville-MD-21234-USA). Dan's Get Offers campaign is officially launched.

<br>

**Day 5:** After just two days of tour requests and buyer verification coordinated entirely by OfferMarket, Dan receives multiple competitive offers at his target price point.

<br>

**Day 7:** Dan selects the best offer (AS IS, cash, close in 21 days or less)

<br>

**Day 25:** Coordinated by OfferMarket, Dan closes his transaction and receives his target proceeds.

<br>

## Seller feedback:

> From start to finish OfferMarket was wonderful to work with. They communicated well in every step of the process and made me feel very comfortable that I was in good hands. I got the price I was looking for and they made the closing process very easy.  I highly recommend OfferMarket.

<br>

## Buyer feedback:

> I enjoyed working with OfferMarket. The team there was very responsive and easy to deal with. They kept to the timeline and the deal closed without a problem.

<br>

Every seller has a story, read our [Google Reviews](https://www.google.com/search?q=offermarket) to see if selling your house fast with OfferMarket is right for you.

<br>

## Sell My House Fast: Get Offers with OfferMarket 👇

Every seller has a Sell My House Fast story to tell. Meet Dan, who sold his house in Parkville, MD in 25 days.

Sell my house fast seller success stories

large_5-Star Reviews - OfferMarket Seller Stories - Blog.jpg

medium_5-Star Reviews - OfferMarket Seller Stories - Blog.jpg

small_5-Star Reviews - OfferMarket Seller Stories - Blog.jpg

thumbnail_5-Star Reviews - OfferMarket Seller Stories - Blog.jpg

Sell My House Fast Success Stories - Blog.jpg

Sell My House Fast: Parkville, MD - OfferMarket Blog

Sell My House Fast Success Story: Dan From Parkville, MD

<br>

If you are buying a house and you are requesting a repair, concession, or change in purchase price, then the answer is yes -- you need to provide the inspection report to the Seller to validate your request.

<br>

If a buyer requests repairs or concessions, they are required to share the home inspection report with the seller in real estate transactions.

Does Buyer need to provide home inspection report to Seller?

large_Does Buyer need to provide home inspection report to Seller.jpg

medium_Does Buyer need to provide home inspection report to Seller.jpg

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thumbnail_Does Buyer need to provide home inspection report to Seller.jpg

Does Buyer need to provide home inspection report to Seller.jpg

Does Buyer need to provide inspection report to Seller?

Does the Buyer need to provide the inspection report to the Seller?

Grow your real estate investing business with the most competitive DSCR loan product. OfferMarket provides DSCR rental loans, bridge loans, hard money, fix and flip, slow flip, and ground up construction loans.

Private Lending | OfferMarket

Private Lending

Understanding Your DTI Ratio

Importance of Calculating Your DTI Ratio

Step-by-Step Guide to Calculating Your DTI Ratio

Interpreting Your DTI Ratio

Tips to Improve Your DTI Ratio

Conclusion

Frequently Asked Questions

Grow your real estate portfolio with OfferMarket

**Last updated:** April 07, 2025

## Understanding Your DTI Ratio

Your [Debt-to-Income (DTI) ratio](https://www.offermarket.us/blog/dti-calculator) measures the percentage of your gross monthly income that goes toward paying debts. It helps lenders evaluate your ability to manage monthly payments and repay debts. A lower DTI indicates better financial health, enhancing your eligibility for loans.

#### Components of DTI Ratio:

1.  **Total Monthly Debt:** Includes all recurring debt payments such as mortgage or rent, car loans, student loans, credit card payments, and other installment loans.
2.  **Gross Monthly Income:** Your total income before taxes and other deductions. This includes salaries, wages, bonuses, and any other income sources.

#### Calculating Your DTI Ratio:

To calculate your DTI ratio, divide your total monthly debt by your gross monthly income and multiply by 100.

#### DTI Ratio Formula:

DTI = (Total Monthly Debt / Gross Monthly Income) × 100

#### Example Calculation:

| Description | Amount ($) |
| --- | --- |
| Total Monthly Debt | 2,000 |
| Gross Monthly Income | 5,000 |
| **DTI Ratio (%)** | 40% |

In this example, a DTI of 40% means that 40% of your income goes toward debt payments. Lenders typically prefer a DTI below 36%, with no more than 28% allocated to housing expenses.

#### Types of DTI Ratios:

1.  **Front-End Ratio:** Focuses on housing-related debts, such as mortgage or rent.
2.  **Back-End Ratio:** Includes all monthly debt obligations, providing a comprehensive view of your financial commitments.

Understanding your DTI ratio enables you to assess your financial stability and make informed decisions about taking on new debt or managing existing obligations.

## Importance of Calculating Your DTI Ratio

Calculating your Debt-to-Income (DTI) ratio provides a clear picture of your financial health. It helps you understand how much of your income goes toward debt payments, enabling effective budget management. Lenders use your DTI to assess loan eligibility and determine the risk of lending to you. A lower DTI improves your chances of loan approval with favorable interest rates.

Monitoring your DTI ratio assists in making informed decisions about taking on new debt. It highlights whether you can afford additional loans, such as mortgages or car financings, without overextending your finances. Additionally, a manageable DTI supports better credit scores, as it reflects responsible debt management.

Maintaining a healthy DTI ratio offers financial flexibility. It allows you to allocate more of your income to savings, investments, or emergency funds. By regularly calculating your DTI, you can identify areas to reduce debt and enhance your overall financial stability.

#### Key Benefits of Calculating Your DTI Ratio:

-   **Loan Approval:** Lower DTI increases eligibility for mortgages, personal loans, and credit cards.
-   **Interest Rates:** Better DTI can qualify you for lower interest rates, reducing the cost of borrowing.
-   **Financial Planning:** Clear understanding of debt obligations aids in creating effective budgets and financial strategies.
-   **Credit Score Improvement:** Managing a low DTI contributes to higher credit scores, reflecting reliable credit behavior.

#### DTI Calculation Example:

Total Monthly Debt: $2,000

Gross Monthly Income: $5,000

DTI Ratio = (Total Monthly Debt / Gross Monthly Income) × 100

DTI Ratio = ($2,000 / $5,000) × 100 = 40%

Lenders typically prefer a DTI below 36%, with housing expenses not exceeding 28%.

## Step-by-Step Guide to Calculating Your DTI Ratio

Follow these steps to accurately calculate your Debt-to-Income (DTI) ratio and assess your financial health.

### Identify Your Monthly Debt Payments

List all recurring monthly debt obligations. Include:

-   Mortgage or rent payments
-   Car loans
-   Student loans
-   Credit card payments
-   Personal loans
-   Any other monthly debt commitments

Ensure each amount is accurate to reflect your total monthly debt accurately.

### Determine Your Gross Monthly Income

Calculate your total income before taxes and deductions. Include:

-   Salary or wages
-   Bonuses and commissions
-   Freelance or side hustle income
-   Rental income
-   Investment income
-   Any other sources of income

Sum all these amounts to find your gross monthly income.

### Apply the DTI Formula

Use the following formula to calculate your DTI ratio:

#### DTI = (Total Monthly Debt / Gross Monthly Income) × 100

For example, if your total monthly debt is $2,000 and your gross monthly income is $5,000, your DTI would be:

#### DTI = ($2,000 / $5,000) × 100 = 40%

A DTI below 36% is typically preferred by lenders, with no more than 28% allocated to housing expenses.

## Interpreting Your DTI Ratio

Understanding your DTI ratio helps assess your financial health and loan eligibility. Here's how to interpret different DTI ranges:

| **DTI Range** | **Implications** |
| --- | --- |
| **0-20%** | Excellent financial health. Eases loan approvals with favorable terms. |
| **21-35%** | Good financial standing. Suitable for most loan types with competitive rates. |
| **36-50%** | Moderate risk. May limit loan options and result in higher interest rates. |
| **51% and above** | High risk. Difficult to qualify for loans and may require debt reduction strategies. |

### Key Insights

-   **0-20% DTI**

Demonstrates strong financial stability. Maximizes loan approval chances and secures lower interest rates.

-   **21-35% DTI**

Indicates good financial management. Eligible for various loan products with favorable conditions.

-   **36-50% DTI**

Suggests higher debt levels. May face challenges in obtaining loans and could encounter higher borrowing costs.

-   **51% and above DTI**

Reflects significant debt burden. Loan approvals are unlikely, and focusing on debt reduction becomes essential.

### Action Steps Based on Your DTI

-   **Low DTI (0-20%)**

Maintain your financial habits. Consider leveraging low DTI for investment opportunities.

-   **Moderate DTI (21-35%)**

Monitor debt levels. Plan for future financial goals while keeping debt in check.

-   **High DTI (36-50%)**

Prioritize paying down debts. Explore options to reduce monthly obligations and improve your ratio.

-   **Very High DTI (51%+)**

Implement a strict debt repayment plan. Seek financial counseling to manage and lower your debt effectively.

By accurately interpreting your DTI ratio, you can make informed decisions to enhance your financial stability and improve loan eligibility.

## Tips to Improve Your DTI Ratio

### Increase Your Income

-   Take on a part-time job or freelance projects.
-   Seek a promotion or raise at your current workplace.
-   Invest in assets that generate passive income, such as rental properties.

### Reduce Your Debt

-   Pay off high-interest credit cards first to minimize interest payments.
-   Consolidate loans to secure lower interest rates and simplify payments.
-   Avoid taking on new debt to prevent your DTI from increasing.

### Refinance Existing Loans

-   Refinance your mortgage to obtain a lower interest rate, reducing monthly payments.
-   Extend the term of your auto loan to decrease your monthly obligations.
-   Refinance student loans to benefit from lower interest rates and lower payments.

### Create a Budget

-   Track all your income and expenses monthly to identify spending patterns.
-   Cut non-essential expenses, such as dining out or subscription services.
-   Allocate more funds toward paying down existing debts to lower your DTI.

### Avoid New Credit Applications

-   Limit the number of credit inquiries to prevent your DTI from rising.
-   Use credit cards sparingly and aim to keep balances low.
-   Regularly monitor your credit report to ensure accuracy and address discrepancies.

### Increase Your Savings

-   Build an emergency fund to cover unexpected expenses without relying on credit.
-   Set aside a percentage of your income each month specifically for debt repayment.
-   Utilize automatic transfers to ensure consistent savings and debt reduction efforts.

### Prioritize Debt Repayment

-   Focus on eliminating the smallest debts first to gain momentum.
-   Allocate extra payments toward debts with the highest interest rates.
-   Maintain consistent payment schedules to demonstrate reliability to lenders.

### Seek Professional Advice

-   Consult a financial advisor to develop a personalized debt management plan.
-   Explore debt counseling services for structured repayment strategies.
-   Utilize online tools and resources to track your progress and adjust your plan as needed.

## Conclusion

Mastering your DTI ratio empowers you to take control of your financial future. By regularly calculating and monitoring your DTI, you gain a clear picture of your financial health. This insight helps you make smarter decisions, whether you're planning to buy a home, refinance a loan, or simply improve your budgeting.

Taking proactive steps to manage your DTI can open doors to better loan terms and increased financial flexibility. Remember, a healthy DTI not only enhances your loan eligibility but also contributes to overall financial stability. Stay informed and take charge of your finances to achieve your long-term goals with confidence.

## Frequently Asked Questions

### What is a Debt-to-Income (DTI) ratio?

The Debt-to-Income (DTI) ratio measures the percentage of your gross monthly income that goes toward paying debts. It helps lenders evaluate your ability to manage monthly payments and assess your financial health. A lower DTI indicates better financial stability, enhancing your eligibility for loans and potentially securing better interest rates.

### How do you calculate the DTI ratio?

To calculate your DTI ratio, divide your total monthly debt by your gross monthly income and multiply by 100. For example, if your total monthly debt is $2,000 and your gross monthly income is $5,000, your DTI would be 40%. This simple formula provides insight into your financial obligations relative to your income.

### Why is the DTI ratio important for loan approvals?

Lenders use the DTI ratio to determine your ability to take on new debt. A lower DTI suggests you have sufficient income to manage additional loans, increasing your chances of approval. Typically, lenders prefer a DTI below 36%, with no more than 28% allocated to housing expenses, as it indicates better financial health and lower risk.

### What are the ideal DTI ratio ranges?

DTI ratios are categorized as follows:

-   **0-20%:** Excellent financial health
-   **21-35%:** Good standing
-   **36-50%:** Moderate risk
-   **51% and above:** High risk
    
    Understanding these ranges helps you assess your financial situation and take necessary steps to improve your DTI for better loan eligibility.

### How can I improve my DTI ratio?

Improving your DTI ratio involves either increasing your income or reducing your debt. You can achieve this by taking on part-time jobs, paying off high-interest loans, refinancing existing debts for better rates, creating a budget to track expenses, and avoiding new credit applications. These strategies help lower your DTI, enhancing your financial stability and loan approval chances.

### What is the difference between the front-end and back-end DTI ratios?

The front-end DTI ratio focuses solely on housing-related debts, such as mortgages or rent, compared to your gross monthly income. In contrast, the back-end DTI includes all monthly debt obligations, including loans, credit cards, and other recurring payments. Both ratios help lenders assess your ability to manage different levels of debt.

### How often should I monitor my DTI ratio?

Regularly monitoring your DTI ratio is essential for maintaining financial health. By keeping track of your DTI, you can identify areas to reduce debt, make informed budgeting decisions, and improve your credit score. Frequent reviews help ensure you stay within ideal DTI ranges, supporting long-term financial stability.

### Can a high DTI ratio affect my credit score?

Yes, a high DTI ratio can negatively impact your credit score. Lenders view a high DTI as a sign of potential financial strain, which can make it harder to qualify for loans and may lead to higher interest rates. Maintaining a lower DTI not only improves loan eligibility but also supports a healthier credit score.

### What steps can I take if my DTI ratio is too high?

If your DTI ratio is too high, prioritize debt repayment by focusing on eliminating high-interest loans first. Create a realistic budget to manage expenses, avoid taking on new debt, and consider consolidating debts to lower monthly payments. Additionally, seeking advice from a financial advisor can provide personalized strategies to reduce your DTI effectively.

### How does the DTI ratio affect refinancing options?

Your DTI ratio plays a crucial role in refinancing decisions. A lower DTI increases your chances of securing favorable refinancing terms, such as lower interest rates and better loan conditions. Lenders prefer borrowers with lower DTIs as they are seen as less risky, making refinancing more accessible and beneficial for improving financial terms.

---

## Grow your real estate portfolio with OfferMarket

OfferMarket is a real estate investing platform. Month-in-month-out, thousands of real estate professionals leverage our platform to grow and optimize their business. Our mission is to help you build wealth through real estate and we offer the following benefits to our members:

💰 **[Private lending](https://www.offermarket.us/loans?ref=content-cash-flow-calculation-formula)**</br>
☂️ **[Insurance rate shopping](https://www.offermarket.us/insurance?ref=content-cash-flow-calculation-formula)**</br>
🏚️ **[Off market properties](https://www.offermarket.us/listings?ref=content-cash-flow-calculation-formula)**</br>
💡 **[Market insights](https://www.youtube.com/channel/UCRoNHXFVgI36SV0QQpyf9fw)**</br>

---

[![Got off market listings - access deals](https://cms.offermarket.us/uploads/Got_off_market_listings_access_deals_73468e4b7a.jpg)](https://www.offermarket.us/listings)

---

 Learn how to calculate your dti ratio with our easy guide. Start managing your debt smarter today!

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How to Calculate Your DTI Ratio: Step-by-Step Guide for Financial Health

Understanding Your DTI Ratio

Components of DTI Ratio:

* Takes 2 minutes, no credit pull