What does "debt service" refer to?

Debt service refers to the total amount required to cover loan repayment, encompassing both principal and interest payments that a borrower must make to the lender over a specific period. This concept is crucial in evaluating a borrower's capacity to manage their financial obligations, as it indicates the actual cash flow needed to meet loan commitments. Understanding debt service is vital for mortgage loan originators and lenders, as it helps determine whether a borrower's income is sufficient to support their existing and potential debt obligations.

The other options provide different aspects of the borrowing process but do not accurately define debt service. While the total amount of income a borrower can use for the loan relates to their overall financial capacity, it is separate from the specific definition of debt service. Fees associated with the mortgage process, although important for total closing costs, do not fall under the category of debt service. Similarly, loan interest payments are components of the overall repayment amount but do not capture the full scope of debt service, which includes both principal and interest payments.