First Time Homebuyer Question #2
Blog by Diane Cardoso | November 1st, 2011
How much purchasing power do I have when shopping for a home? Two important ratios that lenders use to determine how much home you can buy are: 1) GDS - Gross debt ratio - which is a combination of your possible monthly mortgage payment, heating costs, and property taxes divided by your gross monthly income. This ratio cannot exceed 32% for the GDS. The second ratio that lenders look at is your TDS - Total debt service - is your total monthly debt (including items like credit cards, student loads, car loans etc) divided by your gross monthly income. This ration cannot exceed 40% for the TDR. Getting a "pre-approval" from through a banker or mortgage broker is a good way to learn what your GDS and TDR ratios are, and how much home purchase power you have.