Location is one of the most important elements when you are searching for a house. The house price depends on it, but that is not the only thing. The location you choose can also have an effect on the amount you will be loaned. How is that? Your commuting costs are directly related to your location, and this is a factor lenders consider.
There are some financial agencies which use your commuting expenses when they determine your debt to income ratio. If your house is located far from your work, you will incur greater costs and if it is located in close vicinity, your expenses will decrease. The debt to loan value is what lenders use to offer you a mortgage rate and amount, and so you should consider commuting when purchasing a home.
There are instances when longer distances may still provide you with the loan you want. However, it will still affect your income and thus your payments.
Lenders do a little math to analyze commuting costs
There are over 600,000 individuals who travel for 90 minutes or 50 miles when they go to work. Since the distance is excessive, your car is subjected to wear and tear. Gasoline prices may also rise and affect your monthly budget. As far as free miles are concerned, they are almost always limited and if you drive more than this distance, lenders will regard that as an additional expense.
Each lender uses different values for commuting costs. Assuming your chosen lender goes for $5 for every extra mile if the miles are greater than 50. Since you are travelling 90 miles, the lender will evaluate your daily commuting costs to be 40*$5=$200 per day. This results in a monthly value of around $2,200 for a five week period. Once this amount is added to your debt to income ratio, it will rise. What happens then? You will be given a lower loan amount.
Know your commuting costs before you buy
If your search online, you will come across the housing and transportation calculator which will give you an estimate of your costs. Talking to both your real estate agent and the lender will also help. If your lender has no restrictions about commuting, there is nothing to worry about. If that is not so, you can either think about paying a greater down payment or just buying a more affordable house closer to work.
Source: www.realestate.aol.com
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