Why might a real estate lender look at both the gross debt service ratio and the...

Why might a real estate lender look at both the gross debt service ratio and the total debt service ratio?

Expert Solution

Real estate lender have to look at both gross debt service ratio as well as total debt service ratio Because,

Gross debt service ratio is used to find out that how much proportion a lender is paying out of his income. it helps to find out that how much loan should be offer to lender. in simple words gross debt service ratio is the comparison between expense and income.The gross debt service ratio is calculated as

whereas Total debt service ratio determine whether borrower can make or manage monthly payment or will be able to repay the loan amount. it generally consider property tax, property insurance and any other obligation that have to pay.

therefore a real estate lender have to look and understand both GDSR and TDSR.

I hope this clear your doubt.

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Why might a real estate lender look at both the gross debt service ratio and the...

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