Use these two simple rules to discover what you can afford to pay for a home. Understanding these rules can also help you when it’s time to get approved for a mortgage.
Affordability Rule #1
Your monthly housing costs should be no more than 35% - 39% of your average gross monthly income. This percentage is known as your gross debt-to-income or gross debt service (GDS) ratio.
Housing costs include:
Affordability Rule #2
Your monthly debt load should be no more than 40% of your average gross monthly income. This percentage is known as your total debt-to- income or total debt service (TDS) ratio.
Your monthly debt load includes:
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