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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.