4/13/2009

Want a mortage?....here's what i learned recently....

Here is what I learned about GDSR and TDSR

Like many 20-something year olds, I am very eager to be in my own place. I know this is 3 or so years away, but I want to be so prepared in that time, armed with knowledge and money so that the process is relatively simple.

I recently got some advice about your debt to income ratio, and how this can affect the amount of money you can borrow to mortgage a home. This is the ratio that lenders look at to determine what they will give you.

There are two kinds of ratio your Gross Debt Service Ration (GSDR) and your Total Debt Service Ratio (TDSR).

Your GDSR cannot equal more than 32% of your gross income. An easy way to remember what falls into the GSDR is to keep in mind PITCH. PITCH is Property, Insurance, Taxes, Condo Fees, Heat. If you are looking at a home, not a condo, the acronym is PITH. So add up all of these foreseeable expenses and dived that by your income. So PITH/Income = GSDR

If your GSDR equals more than 32%, it is HIGHLY unlikely that you will get your mortgage. I won't say that you won't get it - b/c i'm not a financial advisor, but this is my understanding.

Your TSDR, or your Total Debt Service Ratio includes PITCH (or PITH as the case may be) as well as all other forms of debt. Other forms include student loans, credit cards, lines of credit ect. Your TDSR cannot exceed 40% of your income if you are looking to get a mortgage. So PITH + Other Debt/Income = TDSR.

This is what I learned, I hope that it is helpful.
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1 comment:

  1. So you are arming yourself with knowledge. Good job!

    ReplyDelete

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