DTI vs. Debt Yield: Residential vs. Commercial Real Estate
Understand the difference between Debt-to-Income (DTI) for residential mortgages and Debt Yield for commercial real estate loans.
Debt-to-income (DTI) compares monthly debt payments with gross monthly income. CRE debt yield compares annual property income with loan balance. The first measures payment obligations against income; the second measures property income against debt principal. Neither ratio alone determines financing eligibility.
Formulas and examples
| Metric | Formula | Hypothetical example |
|---|---|---|
| DTI | Monthly debt payments / gross monthly income | $4,000 / $10,000 = 40% |
| Debt yield | Annual property income / loan balance | $900,000 / $10 million = 9% |
| DSCR | Annual qualifying income / annual debt service | $900,000 / $720,000 = 1.25x |
The time periods and denominators differ. Do not substitute a DTI percentage for a DY target or confuse annual loan principal with monthly payments.
There is no universal 43% approval rule
The CFPB explanation of DTI describes the payment-to-income calculation and notes that loan products and lenders have different limits. A calculator cannot approve or deny a mortgage from this ratio alone. Confirm current product requirements rather than treating 43% as a blanket federal cutoff.
Commercial underwriting still considers the borrower
Property income is central to many income-producing CRE analyses, but borrower or business cash flow, sponsor resources, guarantees and other conditions may also matter. A nonrecourse label does not mean every personal obligation or carve-out is absent. See the sponsor review guide.
Choose the calculation for the question
Use debt yield to compare property income with balance, DSCR to assess payment coverage and LTV for collateral leverage. The commercial loan guide explains how these tests fit into the wider review.
For a personal mortgage, follow the lender's DTI instructions for qualifying income and included obligations. A property's debt yield does not replace those borrower-specific requirements.
Ready to run the numbers?
Get your result instantly — private, in your browser.