Debt Ratio

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A person’s monthly obligations divided by their gross monthly income.

This key calculation helps a lender understand if you can make your mortgage payments.

Lenders are most interested in a person’s minimum required housing expenses, loan payments, credit cards and support payments. Things like cable TV, your cell phone, internet and insurance costs are bills that can be cancelled. Therefore, lenders exclude them from the debt ratio calculation.

See also: Gross Debt Service (GDS) ratio and Total Debt Service (TDS) ratio

Synonyms:
debt service ratio,debt-ratio
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