There are two situations where commuting costs come into play for a VA buyer. The first occurs when the buyer wants to purchase a home a significant distance from their residence. The second occurs when the VA buyer will become a geographic bachelor. As an agent you need to know if either of these situations applies to your buyer because it can impact their loan approval.
Working a Significant Distance From Home
This may surprise you, but the distance your VA buyer travels to work each day matters.
The Department of Veterans Affairs requires any significant commuting costs to be listed and considered on a veteran’s loan application as a job related expense. The VA doesn’t detail the number of miles they deem significant, leaving interpretation up to individual lenders.
As a real estate agent, you need to be aware of whether the homes your buyer is looking at could result in a significant commute. It shouldn’t be too difficult to determine. Ask your buyer where they’ll be working and note the distance from their workplace to their desired neighborhoods. If they’re interested in homes with a significant commute follow up with their lender to determine the commute distance they deem significant.
If your buyer is looking at homes requiring a significant commute their lender will use a calculation for mileage. For example, a lender may have a policy that they calculate $0.50 per mile over 50 miles each way. So in this case if a buyer travels 120 miles each day round trip, the lender would take 120 miles, subtract the 100 miles allotted and then multiply 20 miles by $0.50 totaling $10 per day in commuting expenses. The commute cost would then be added to the buyer’s expenses when calculating their debt-to-income ratio and residual income.
It’s important to note that a lender may be willing to offset any reimbursement a buyer receives from their employer for these costs. If your buyer receives funds for their commute from an employer, encourage them to provide documentation to their lender.
There may be other methods of calculating commute if your buyer is using an alternate form of transportation such as a bus or train. Consult with your buyer and their lender if this applies to their circumstances.
Geo-bachelor may be a term you’re unfamiliar with, but it’s a reality for many active duty service members. When a service member lives in one location and then gets transferred to another location they’re faced with a few tough choices. A major one being whether their family will relocate with the service member.
There’s various reasons why the service member and their family may choose to not relocate together. When this happens, the housing expenses for the family residence and the service member’s residence must be considered on a buyers loan profile. An underwriter will also want information on the travel expenses for the service member to visit their family. They’ll want to know the frequency of visits, method of travel and estimated costs. These costs will then be added to the service member’s debt-to-income ratio on the loan application which can impact overall affordability and preapproval amounts.
As an agent you can help your buyer avoid issues regarding loan approval due to commuting costs by asking a few simple questions during your buyer’s home search. Consider your buyer’s lender as another member of the homebuying team, working with them to overcome any homebuying hurdles your buyer may face.
If you have any questions about commuting costs feel free to email me any time firstname.lastname@example.org.
Photo courtesy of flickr user Robert Couse-Baker.