What is the total debt service (TDS) ratio?

The total debt service (TDS) ratio is defined as the percentage of a borrower's gross income that is used to cover all debt obligations. This includes not just housing costs, such as mortgage payments, property taxes, and heating expenses, but also other recurring debts like car loans and credit card payments. Lenders use the TDS ratio to assess a borrower's ability to manage their overall debt load and ensure they won't take on more debt than they can comfortably handle based on their income level.

In contrast, other options focus on different aspects of debt management. The option related to housing expenses exclusively pertains to the gross debt service (GDS) ratio, which considers only housing-related costs. Meanwhile, dividing the overall loan amount by the borrower's income doesn't capture the broader scope of debt obligations. Lastly, summing all credit card payments overlooks other forms of debt that should be factored into the TDS ratio calculation. Therefore, A is the most comprehensive definition of the TDS ratio, accurately reflecting its purpose within mortgage lending practices.