How Lenders Measure Affordability.
When a lender reviews an application, one of the first things they calculate is how much of your income goes toward housing and debt. Two ratios — Gross Debt Service (GDS) and Total Debt Service (TDS) — turn that question into numbers. Understanding how they work makes it far easier to see how much you may be able to borrow, and where there's room to strengthen your position.
GDS and TDS, side by side
Both ratios compare your obligations to your gross (before-tax) income. GDS looks only at housing; TDS adds everything else you owe.
Gross Debt Service
GDS measures your housing costs as a percentage of your gross income. Lenders typically add up your mortgage payment, property taxes, heating costs, and — where it applies — half of your monthly condominium or maintenance fees. That total is divided by your gross income to produce a percentage.
As a general guideline, many lenders look for a GDS in the range of the mid-30s to roughly 39 percent, though the exact threshold varies by lender and program. The point of GDS is simple: it estimates how comfortably the home itself fits within your earnings, before any other debts are considered.
Total Debt Service
TDS starts with the same housing costs used in GDS and then adds all of your other monthly debt payments — credit cards, lines of credit, car loans, student loans, and similar obligations. That combined total is divided by your gross income.
As a general guideline, many lenders look for a TDS in the range of the low-40s to around 44 percent, again depending on the lender, the program, and your overall profile. Because TDS captures your full monthly commitment, it usually has the larger say in how much you can borrow.
Important: ratios and limits vary by lender and program, and the mortgage stress test applies — qualifying payments are calculated at a higher rate than your contract rate. The figures above are illustrative guideline ranges, not fixed rules or a commitment to lend. Final lending decisions rest with the lender and depend on the borrower, the property, the documentation provided, and each lender's guidelines.
What counts as debt
These are the obligations lenders commonly fold into the TDS calculation. Even balances you pay off each month can be counted using a minimum-payment estimate.
Lenders typically use an estimated minimum monthly payment based on your balance, even if you pay the full amount each month.
Personal, secured, or home equity lines of credit are included, often based on a payment calculated against the outstanding or available balance.
The monthly payment on any vehicle financing or lease is counted for as long as the obligation remains.
Required monthly payments on government or private student loans are factored in, including amounts that resume after a grace period.
Court-ordered or agreed spousal and child support obligations are treated as monthly commitments in the calculation.
How to improve your ratios
If your ratios sit higher than you'd like, there are practical levers. The right combination depends on your situation.
Pay down debt
Reducing or clearing balances on credit cards, lines of credit, and loans lowers your monthly obligations, which can bring your TDS down and free up borrowing room.
Increase your down payment
A larger down payment means a smaller mortgage and lower payments, which reduces both housing costs and the ratios lenders calculate.
Consider a longer amortization
Spreading the mortgage over a longer amortization lowers the monthly payment used in the calculation, though it means more interest over the life of the loan.
Add a co-applicant
Applying with a spouse, partner, or family member can combine incomes, which may improve the ratios — provided their own debts and profile support the application.
See an estimate
Try the affordability calculator
Want a rough sense of how your income and debts translate into a purchase price? The affordability calculator lets you plug in your numbers and see an illustrative estimate. Results are for general guidance only — a full review with your documents will give you the clearest picture.
Related pages
Mortgage Qualification
How lenders assess income, credit, and the overall picture when deciding what you qualify for.
Underwriting
What happens behind the scenes when a lender reviews and assesses your file.
Calculators
Affordability, payment, and other tools to help you plan with confidence.
Credit Scores
How your credit history influences lender decisions and the options available to you.
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