Mortgage Agent Licensing Practice Exam · Question
Which of the following describes the purpose of calculating the Gross Debt Service (GDS) ratio in mortgage underwriting?
The Gross Debt Service (GDS) ratio specifically measures how much of a borrower's gross income is consumed by housing-related costs, including mortgage payments
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Question: Which of the following describes the purpose of calculating the Gross Debt Service (GDS) ratio in mortgage underwriting?
Answer options: ✅ To determine if a borrower's housing costs are affordable relative to their gross income.
- To assess a borrower's total debt obligations, including housing and other loans, against their gross income.
- To evaluate the borrower's credit history and repayment reliability.
- To calculate the total equity a borrower has in their current property.
Correct answer: To determine if a borrower's housing costs are affordable relative to their gross income.
Explanation: The Gross Debt Service (GDS) ratio specifically measures how much of a borrower's gross income is consumed by housing-related costs, including mortgage payments, property taxes, and heating. This helps lenders determine the affordability of the proposed mortgage payment.
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