Gross Debt Service
The percentage of gross household income needed for the proposed home.
- Mortgage payment
- Property taxes
- Heating costs
- A portion of condo fees, when applicable
Housing costs ÷ Gross income
GET MORTGAGE READY
Know what lenders see
before you start searching.
A mortgage approval is more than an income number. Learn how lenders consider your housing costs, monthly debts, credit, down payment and documents—then identify the next step that can strengthen your position.
FROM PLANNING TO APPROVAL
What happens before the lender says yes?
The process becomes easier when you know what is being reviewed and what each stage actually means.
- 01Financial snapshot
Review income, down payment, credit and existing monthly obligations.
- 02Pre-qualification
Estimate a preliminary buying range using information you provide.
- 03Document review
Verify employment, income, debts, credit and the source of your down payment.
- 04Pre-approval
Receive a more reliable range and, in some cases, a time-limited rate hold.
- 05Final approval
The lender re-confirms your finances and approves the specific property before closing.
Pre-approval is not final approval. The property, appraisal, mortgage insurer and any changes to your finances can still affect the lender’s decision.
HOW AFFORDABILITY IS MEASURED
GDS looks at the home.
TDS looks at the whole picture.
These ratios compare required monthly costs with gross household income. Lower debt obligations generally leave more room for housing costs.
Total Debt Service
The percentage of gross household income needed for housing plus other required debt payments.
- Everything included in GDS
- Car and student loans
- Credit cards and lines of credit
- Other recurring debt obligations
Housing + debts ÷ Gross income
For this educational example, common insured-mortgage benchmarks of 39% GDS and 44% TDS are shown. A lender may apply different limits depending on the borrower, property, mortgage product and insurer.
SAME INCOME. DIFFERENT OUTCOME.
Why monthly debt matters.
Both buyers earn $120,000 per year and are considering a home with estimated monthly housing costs of $2,900. Their GDS is identical—but their TDS tells a different story.
A
Buyer ANo monthly debt payments
- Gross monthly income
- $10,000
- Housing costs
- $2,900
- Other monthly debt
- $0
GDS29%
TDS29%
More of this buyer’s income remains available within the debt-service calculation.
B
Buyer B$1,000 in monthly debt payments
- Gross monthly income
- $10,000
- Housing costs
- $2,900
- Other monthly debt
- $1,000
GDS29%
TDS39%
The same income supports less borrowing room because other debts use part of the monthly capacity.
The takeaway
Income matters, but lenders also look at how much of that income is already committed. Paying down or restructuring certain debts may improve a buyer’s position—but the right move depends on the full application.
PREPARE YOUR FILE
Documents a mortgage professional may request.
Requirements vary, but organizing these items early can make the review faster and expose missing information before an offer is submitted.
Income
Employment letter, recent pay statements, Notices of Assessment and additional documents for variable or self-employed income.
Down payment
Account statements showing the source and history of your funds, plus gift documentation when applicable.
Debts and credit
Current balances, required payments and consent for the lender or broker to review your credit history.
Property
Once you purchase, the lender reviews the agreement, listing details and potentially an appraisal or other property documents.
YOUR NEXT STEP
Not sure what is holding you back?
Start with the obstacle you can identify—debt, credit, down payment, income or simply not knowing your numbers. Richard can help you organize the right questions before you speak with a mortgage professional.