GROSS DEBT SERVICE is the percentage of your gross income that is required to cover housing costs. It includes mortgage payment, property taxes, heat (approximately) and 50% of the condo fees, if applicable. The GDS should not be over 32%. As an example, if you had a gross monthly income of $4,500 and were applying for a mortgage, the bank would look at the $1,000 mortgage payment, $200 property taxes and $150 heating expense. This $1,350 divided by $4,500 is 30%.
TOTAL DEBT SERVICE is the percentage of your gross income that is required to cover housing costs and any other debt. These costs include credit card payments, credit line payments and car loan payments and should not be higher than 40%. Continuing with the example above, if you add a $100 credit line payment and a $300 car payment to the $1,350 housing cost, the bank would divide $1,750 by $4,500 to get a TDS of 39%.
A $300,000 mortgage amortized over 25 years at 3.09% plus annual taxes of $3,000 would be a monthly payment of $1,683.63 plus heat at $100 for a total of $1,783.63. Based on an annual income of $66,000 the GDS would be 32% and is within the qualification ratios.
GDS/TDS has to be within the 32/40 for a regular deal. If there is perfect credit sometimes the limits can be pushed to a maximum of 39/44.