GDS and TDS: The Two Ratios That Decide Your Approval

When a lender decides how much you can borrow, two ratios do most of the work. They are called GDS and TDS, and they measure how much of your income is consumed by housing and debt. Understanding them tells you, before you ever apply, roughly how much home a bank will let you buy.

Your gross debt service ratio is the share of your gross monthly income that goes toward housing. It adds up your mortgage principal and interest, your property taxes, your heating costs, and, for a condo, half of the maintenance fees. Divide that total by your gross monthly income and you get your GDS. Most lenders want to see this at or below thirty nine percent for an insured mortgage.

Your total debt service ratio starts with everything in GDS and then adds the rest of your monthly obligations: car payments, credit card minimums, lines of credit, student loans, and support payments. This is the number that captures your whole financial life, not just the roof over your head. For an insured mortgage, lenders typically want TDS at or below forty four percent.

This is why paying down a car loan or a lingering credit card balance can increase your buying power more than a raise would. Every monthly payment you eliminate frees up room under the ceiling.

You can estimate your own ratios with a calculator and a realistic budget. If your ratios are already near the limits, you have two levers: increase income or decrease existing debt. Even a few months of aggressively clearing small balances can shift how much a lender will advance. Going in with your ratios in healthy territory also gives you a cleaner, faster approval.

GDS and TDS are the quiet math behind every mortgage approval. The limits are roughly thirty nine percent for housing and forty four percent for total debt on insured mortgages, though exact thresholds vary by lender and program and do change over time. Knowing your numbers before you tour homes keeps you shopping in a price range a bank will actually finance. A mortgage professional can run your specific ratios and show you exactly where you stand.