Sarah earns $80,000 a year and has other monthly debt payments of $500. Using a Total Debt Service (TDS) ratio limit of 44%, what is the maximum monthly housing cost she can qualify for?
Correct Answer
A) $2,433
Gross monthly income is $80,000 ÷ 12 = $6,667. At 44% TDS, total debt payments may reach $6,667 × 0.44 = $2,933. Her other debts use $500 of that, leaving $2,933 − $500 = $2,433 for housing costs.
Why This Is the Correct Answer
TDS ceiling $2,933 minus existing debt payments $500 = $2,433 available for housing costs.
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