How Lenders Calculate Mortgage Affordability

When it comes to getting approved for a mortgage, lenders use affordability calculations to determine how much you can borrow. These calculations vary by lender, but they all revolve around two key percentages based on your monthly income: Gross Debt Service (GDS) and Total Debt Service (TDS).

Gross Debt Service (GDS): Your Housing Costs

Your GDS ratio is the percentage of your gross monthly income that goes toward your housing costs. Most lenders want this to be 39% or lower.

To calculate your GDS, add up:

• Your mortgage payment (principal + interest)

• Property taxes

• Heating costs

• Half of your condo fees (if applicable)

Then, divide the total by your gross monthly income.

GDS Formula:

(Principal + Interest + Taxes + Heat) / Gross Annual Income

Total Debt Service (TDS): Housing + Other Debt

Your TDS ratio includes everything from your GDS calculation, plus any other monthly debt payments—like car loans, credit cards, or lines of credit. Lenders want this to be 44% or lower of your gross monthly income.

TDS Formula:

Mortgage Payment + Property Taxes + Heating Costs + Other Debt Payments / Gross Monthly Income

We Can Help You Get Pre-Approved

Understanding these numbers is one thing—getting a mortgage that works for your situation is another. That’s where we come in.

✅ Get pre-approved in minutes and know exactly what you can afford.

✅ Work with lenders who fit your financial picture, no matter your income source.

✅ Gain peace of mind when shopping for your home.

Ready to take the next step? Let’s get started!