The two ratios lenders will look at are:
•GDS (gross debt service) ratio and
•TDS (total debt service) ratio.
•A GDS ratio is a the percentage of your income needed to pay all you monthly household expenses. Your GDS ratio should typically be 39% or lower.
•GDS ratio = Mortgage payments + property taxes + heating costs (+ 50% of condo fees if applicable) / annual income.
•A TDS ratio is the percentage of your income needed to pay all existing debt, including your monthly household expenses (GDS). Your TDS ratio should typically be 44% or lower.
•TDS ratio = Housing expenses (GDS) + credit card interest + car payments + loan expenses / annual income.
*Higher ratios are accepted upon consideration.
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