A single applicant earns $95,000 in verified salary. They are purchasing a $450,000 detached home with 10% down, leaving a mortgage of $405,000 amortized over 25 years. Property tax is $3,600/year; heat is estimated at $1,800/year. At a qualifying rate of 5.90% (the contract rate of 3.90% plus the 2% buffer, since that exceeds the 5.25% floor in this example), the monthly principal and interest payment works out to roughly $2,345.
GDS numerator: $2,345 (P&I) + $300 (tax) + $150 (heat) = $2,795/month. Gross monthly income is $95,000 ÷ 12 = $7,917. GDS = $2,795 ÷ $7,917 = 35.3% — comfortably under the 39% ceiling, and even close to the tighter 35% standard threshold, so this file has real room. With a $450/month car loan as the only other debt, TDS numerator is $2,795 + $450 = $3,245, giving TDS = 41.0% — also well within range on either threshold.
A couple earning a combined $140,000 is purchasing a new-build condo for $520,000 with 5% down on the first $500,000 and 10% on the remaining $20,000 — a minimum down payment of $27,000 under the standard insured tiers. The mortgage is $493,000 over 25 years. The condo fee is $480/month, of which 50%, or $240, counts toward the ratios. Because the unit is a new build, the tax figure has to be estimated against the purchase price rather than an old assessment, and comes in at $325/month; heat, being a well-insulated new condo, is estimated at a modest $60/month.
At the same 5.90% qualifying rate, P&I on $493,000 over 25 years comes to roughly $3,155/month. GDS numerator: $3,155 + $325 (tax) + $60 (heat) + $240 (50% of condo fee) = $3,780. Gross monthly income is $140,000 ÷ 12 = $11,667. GDS = $3,780 ÷ $11,667 = 32.4%, well inside the room available. With combined debt of a $600/month student loan and a $150/month minimum on a credit card, TDS numerator becomes $3,780 + $750 = $4,530, giving TDS = 38.8% — still comfortably passing.
A borrower earning $80,000 wants a $380,000 mortgage on a $420,000 home with 10% down, amortized over 25 years. GDS on its own comes in fine at 33%. But the borrower is also carrying a $28,000 auto loan at $650/month, a credit card with a $9,000 balance requiring a $270 minimum payment, and a personal line of credit with a $12,000 balance, treated at 3% of balance monthly, or $360. TDS numerator: the GDS housing cost of roughly $2,200 plus $650 + $270 + $360 = $3,480. Gross monthly income is $6,667. TDS = $3,480 ÷ $6,667 = 52.2% — a hard fail against any A-lender ceiling.
Diagnosing the fix means looking at which debt is doing the most damage relative to its size. The auto loan is a fixed obligation the borrower cannot easily reduce before closing. The credit card and line of credit, though, total $21,000 in balances generating $630/month in required payments — precisely the kind of revolving debt Module 08's levers target directly, whether by paying it down from the borrower's own funds, consolidating it into the mortgage where the ratio math allows, or, in this case, using a portion of the borrower's cash otherwise earmarked for a larger down payment to retire the line of credit balance instead and bring TDS back under 44%.
In example three, which piece of debt is the highest-leverage target for creating ratio room, and why?
Revolving debt is the most controllable lever in this file: paying down or eliminating a credit card or line-of-credit balance immediately reduces the minimum-payment or percentage-of-balance figure counted in TDS, unlike a fixed-term auto loan the borrower cannot easily accelerate before closing. The auto loan is a real number but a much harder one to move quickly. Extending amortization would help GDS marginally but does not address the underlying debt load, and the file is clearly workable — 21,000 in revolving balances generating 630 dollars a month in payments is exactly the kind of thing Module 08 calls a lever, not a dead end.
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