There are so many things that can impact your ability to get a mortgage, and the rate and terms of that mortgage. Your credit history, your debt-to-income ratio, your job… and while you might be thinking that having a job is obviously important, there’s another job factor that can affect your mortgage: your commute. Long commutes can sometimes delay or derail a mortgage approval.
Why? Simply put, a mortgage lender scrutinizes all your information because they’re determining what kind of a risk you are and based on that risk, what interest rate and terms you may qualify for. If you have a long commute – say, longer than an hour one-way – on top of your regular, eight-hour day, which will raise red flags for them. Is this property really going to be your primary residence or is it a second home or an investment property. Sure, you may have the opportunity to work from home from time to time, but you need to provide the lender with additional explanations. But a lender might see this as a potential risk, because they may suspect that the home you’re purchasing won’t be your primary residence.
When lenders are qualifying you as a borrower, they look at what kind of home you’re buying and identify factors that could make you a high risk applicant. They prefer lending on a primary residence, where you’re planning on living – that way they know that if financial trouble hits, it’s less likely you’ll default on your loan when push comes to shove. If you invest in a vacation
property, that’s a little riskier… and if it’s an investment property, where you never live, that’s considered the riskiest scenario for a lender and comes with higher interest rates and fees. So you can understand how a lender might look at your commute time and think twice about your insistence that you’ll be living in the proposed property full-time. Properties that are located more than an hour away from where you work could be considered a second home or worse, an investment property.
If you have a long commute, to lessen your lender’s fears, you may want to get a letter from work – maybe from your boss, or HR – detailing the parameters of your job, sharing information such as what your job entails, your hours, how much and how often you travel. You may even want to consider including your tenure, as being in the position longer term will help your lender see you as being a stable candidate. Without this, your lender might decide to label your loan as an investment property, which will raise your rates and fees, and make your monthly payment more expensive.
However, that doesn’t mean that you can’t prove that this won’t be your primary residence – you’ll just have to provide documentation that details your working, traveling and living situation so your lender knows what they’re qualifying you for. You may also have to submit proof of your commute time.
If this particular home isn’t going to be your primary residence, then it’s best to be up front with your lender about your intentions, and consider the space as a second home. Remember, while your lender works to protect their investment, they also work with and for you to ensure you have the best loan possible to support you in your needs. Being up front and honest with them will help them to structure the loan appropriately and not classify your home as an investment property, for which you’ll have to put at least 20% down and be subject to higher rates and fees.
If you have any doubts or concerns, talk with your real estate professionals. They can help you determine the right course of action.