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Homeownership Affordability Rules

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:

  • Your monthly mortgage payment (principal and interest)
  • Property taxes
  • Heating expenses
  • 50% of condo fees (if applicable)

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:

  • Housing costs (amount calculated in rule 1)
  • Car loans or leases
  • Credit card payments
  • Line of credit payments
  • Other mortgage payments

As always, if you have any questions, please do not hesitate to reach out to me.

This is by far the best brokerage I have ever been a part of, it has literally changed my life!!!!

Peter Ricketts
Mortgage Agent, Pineapple