Blue Route From Bullens Lane At Dusk
According to the U.S. Census Bureau over 600,000 Americans face megacommutes of at least 90 minutes and 50 miles a day. Many people have moved out further away from cities and job centers in order to get more house for their money.
However few prospective borrowers consider a more subtle way location could impact their budget and possibly their home purchasing power – commuting costs.
Policies regarding the inclusion of commuting costs in the underwriting process vary by lender, and some may consider commuting expenses only if you have to drive beyond a certain number of miles to work and back every day or week. That monthly cost can factor into your overall debt-to-income ratio (DTI) and directly impact how much you can borrow.
Even if a longer commute will not eat into your purchasing power, it could put a dent in your disposable income. And that could have serious repercussions for your monthly mortgage payment.
The one-two punch of housing and transportation continues to hit Americans directly in the wallet with combined housing and transportation expenses for households in the largest metro areas rising 44% from 2000 to 2010, according to a study from the Center for Housing Policy and the Center for Neighborhood Technology.
A lender may have a cap on “free” miles, and any you drive in excess will come with a cost. For example, let’s say the lender accepts a commute of no more than 50 miles each way per day, with every mile above valued at the IRS standard mileage deduction rate of 56.5 cents.
Continuing the example, assuming the commute from your dream home to your work is 60 miles each way. That’s 10 miles over our fictional lender’s cap, which would come out to $5.65 in commuting costs for a one-way trip.
An underwriter may perform the following math to determine your extra commuting costs:
– $5.65 x two trips = $11.30 per day
– $11.30 x five-day workweek = $56.50 per week
– $56.50 x 50 weeks = $2,825 per year
– $2,825/12 = $235 per month
In this case, $235 is the monthly cost of your commute. Lenders will add that to your list of monthly expenses, which will in turn increase your DTI ratio. That may not cause issues for some borrowers. But those with a borderline debt-and-income picture could be forced to seek a lower loan amount.
Wallingford PA Real Estate – Wallingford, PA 19086
