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What are the Gross Debt Service and the Total Debt Service ratios?

April 26, 2017debt gross ratios service total

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What are the Gross Debt Service and the Total Debt Service ratios?

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The Gross Debt Service (GDS) ratio is the percentage of your gross (or pre-tax) earnings allocated to payment of the mortgage principal and interest, property taxes and energy costs (PITE). This ratio should normally not exceed 32%. Lenders also consider the Total Debt Service (TDS) ratio, the percentage of your gross annual income required to cover fixed payments for all debts and financing obligations, including housing. This ratio must usually not exceed 40%.