Lenders commonly use a TDS ratio of _________ and a GDS ratio of __________ to help determine the amount most people can comfortably afford for housing.
A)20%; 30%
B)40%; 20%
C)40%; 30%
D)30%; 20%
E)20%; 40%

Question

Quizplus · Accepted Answer

Lenders commonly use a Total Debt Service (TDS) ratio of 40% and a Gross Debt Service (GDS) ratio of 30% to help determine the amount most people can comfortably afford for housing. The TDS measures the percentage of a borrower's gross income that goes towards servicing all debts, including mortgage payments, credit cards, car loans, and other loans. The GDS, on the other hand, only looks at the percentage of a borrower's income that goes towards the housing costs, such as mortgage payments, property taxes, heating expenses, and 50% of condo fees, if applicable. A TDS of 40% and a GDS of 30% are considered industry-standard ratios for determining affordability.

Lenders Commonly Use a TDS Ratio of _________ and a GDS