Those two ratios will define your affordability when applying for a mortgage:
- GDS (Gross Debt Service) is the monthly household income percentage covering your housing costs. It must not exceed 39%.
- TDS (Total Debt Service) is the percentage of your monthly household income covering your housing costs and other debts. It must not exceed 44%
GDS = (Total of Mortgage payment or rent, Property taxes, Heating Expenses, 50% of condo fees) divided by your gross income.
TDS = [(Total of GDS, Loan payments, Credit card payments (3% of the outstanding balance), Line of credit payments (interest charges)]divided by your gross income.
Gross income is your income before deductions. If you are married you should use your combined income and debt balances.
If you have a high credit score or some valuable assets, you may still qualify for a mortgage, even if your GDS and TDS are slightly higher than the industry standards.