Chapter 13 - Application Analysis – Application Ratios

Question 1

What does GDS Mean? What is the industry standard?

Answer 1

Gross Debt Service - 39%

Question 2

What does TDS Mean? What is the industry standard?

Answer 2

Total Debt Service = 44%

Question 3

How do you calculate GDS?

Answer 3

GDS = [(PITH + 1/2 condo maintenance fee) / gross income] x 100

Question 4

What does PITH stand for?

Answer 4

Principal + Interest, Property tax, Heat

Question 5

What is the TDS used for? (2)

Answer 5

1. Pre-qualify the borrower by determining the maximum mortgage payment that the borrower
   can afford.
2. Ensure the borrower qualifies within the lender’s Max TDS Ratio

Question 6

How do you calculate the TDS - Maximum Mortgage Payment (MMP)?

Answer 6

Maximum Mortgage Payment = (Income x Max TDS / 100) – (Property Taxes + Heat + 1⁄2 Condo Maintenance Fee + Other Debts)

Question 7

What items should be included in TDS? Give examples

Answer 7

TDS - should include all items that result in a “balance owing” if a payment is not made:

• Loans
• Mortgage payments
• Credit cards
• Child support
• Alimony

Question 8

What items should not be included in TDS? Give examples

Answer 8

If there is a missed payment, it DOES NOT result in a “balance owing”

• Child care expenses (that are not court ordered)
• Food
• Clothing
• Entertainment
• RRSP contributions
• Car insurance
• Property insurance
• Life insurance

Question 9

Fill in the blanks. Lenders will use either the ____ or ____ calculation when determining the max MTG amount. The lender’s decision will be based on the ____ of the two

Answer 9

LTV, GDS/TDS. Lower

Question 10

How do you calculate TDS (ie to verify that the borrower meets the lender’s TDS ratio) ?

Answer 10

TDS = ((PITH + 1⁄2 Condo Mtc. Fee + Other Debts) / Income) x 100