A client earns $80,000 annually and has monthly debt payments of $800. Using a 32% Gross Debt Service ratio, what is the maximum monthly housing payment they can qualify for?
Correct Answer
A) $2,133
The GDS ratio allows housing costs up to 32% of gross income. Monthly gross income is $80,000/12 = $6,667. Maximum housing payment is $6,667 × 0.32 = $2,133.
Why This Is the Correct Answer
Option A ($2,133) correctly applies the 32% GDS ratio calculation. The client's annual income of $80,000 divided by 12 months equals $6,667 monthly gross income. Multiplying this by the 32% GDS ratio ($6,667 × 0.32) yields $2,133.44, which rounds to $2,133. This represents the maximum monthly housing payment (including principal, interest, taxes, and heating) the client can qualify for under standard lending guidelines, regardless of their existing debt obligations.
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A borrower's variable rate mortgage has reached the trigger point. The outstanding balance is now higher than the original mortgage amount despite making regular payments. What is the most likely explanation and immediate consequence?
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