Debt Service Ratio
Debt service ratios compare a borrower’s income to their required payments. Lenders typically look at Gross Debt Service (GDS), which focuses on housing costs, and Total Debt Service (TDS), which includes housing plus other debt like car loans and credit cards.
These ratios are used to assess affordability and risk. Even with a strong credit score, high debt ratios can reduce the maximum mortgage amount a borrower can qualify for.
Why this matters:
Many people focus on the interest rate, but debt ratios are often what determines approval and budget limits. Knowing your ratios helps you plan realistically and avoid last-minute surprises.
Related Mortgage Terms
Often confused with:
Gross Debt Service (GDS) — Housing-only ratio.
Total Debt Service (TDS) — Housing plus other debts.
Closely related:
Mortgage — Ratios affect qualification for a mortgage amount.
Interest Rate — Higher rates can raise payments and ratios.
Next step:
Gross Debt Service (GDS) — Start with the housing-cost ratio lenders look at first.