If your credit score is lower than 680, then you can spend up to 35% of your monthly income on housing costs. If your credit score is higher than 680, then you can spend up to 39%. Housing costs would include heat, property taxes and condo fees (if applicable). This is referred to as your Gross Debt Service, or GDS in mortgage lingo.
For example, if your monthly income is 5,000 and your credit score is 720, then you can spend 1,950 per month on your housing costs.
But wait! There’s more:)
If you have other debts, then your total monthly payments (including your housing costs as above) can’t exceed 42% of your monthly income if your credit score is below 680. If it’s higher than 680, then you can go up to 44% of your monthly income. This is what we call your
Total Debt Service, or TDS.
For example, if your monthly income is 5,000 and your credit score is 720, then you can spend up to 2,200 per month on all of your debt- including housing. Let’s say you have a car payment of 500/mo, you would deduct that from the 2,200, leaving you with 1,700/mo for housing costs.
What can make this difficult is determining what income can be used and how monthly payments are calculated. There are lots of different ways of looking at the same thing. That’s where we come in handy. We look at different situations with different lenders all day, every day, so we can often present multiple ways of looking at an application that results in you getting what you want.
