What does GDS stand for in mortgage lending?

Prepare for the Saskatchewan Mortgage Associate Exam with comprehensive questions and flashcards. Study effectively using multiple choice questions and hints to enhance understanding. Be exam-ready!

In mortgage lending, GDS stands for Gross Debt Service ratio. This financial metric is essential for lenders to evaluate a borrower's ability to manage monthly mortgage payments along with other housing-related expenses. The GDS ratio calculates the portion of a borrower’s gross income that goes towards housing costs, which typically include mortgage payments, property taxes, and utilities.

Lenders generally prefer that this ratio stays below a certain threshold, often around 32% to 39%, depending on the lending institution’s policies. By analyzing the GDS ratio, lenders can ensure that borrowers are not overextending their finances, which decreases the risk of default and ensures borrowers can comfortably meet their housing payment obligations.

The other options do not accurately describe this key metric in mortgage lending. For instance, “Gross Debt Salary” and “General Debt Service” are not recognized terms in the lending industry, and “Gross Deficit Service” is misleading as it suggests a condition of negative financial standing rather than the evaluation of serviceability. Understanding GDS helps both lenders and borrowers make informed financial decisions regarding home financing.

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