Home > 2015 > Mortgages

The Surprising Way Your Job Can Impact Your Mortgage

Advertiser Disclosure Comments 0 Comments

It’s pretty well-known that when you apply for a mortgage, a lender is going to look at your income when deciding whether to approve you. But you may be surprised to hear that your commute can also be a major factor. Here’s what you need to know about getting that mortgage.

Occupancy is an integral component of any home mortgage loan. An owner-occupied home is considered to be the least-risky for a mortgage loan. Second homes and vacation homes follow, with investment properties being the most risky type of financing. The lender assumes if the borrower somehow came into dire financial straits, they would be more likely to walk away from an investment property than the roof over their head. For this reason, lenders charge more — in some cases considerably more — for properties that aren’t owner-occupied.

Now, home lenders go to great lengths to ensure they have met all the credit criteria set forth by Fannie Mae and Freddie Mac. If it’s discovered after the loan is sold that the originating lender made a material oversight in the creation of the loan, the lender may be forced to buy back that loan. A buyback is incredibly costly to a mortgage company’s bottom line. This is why underwriting is necessary and documenting everything is paramount.

So mortgage underwriters (the decision-makers on approvals) thoroughly review each mortgage application questioning “Is this loan scenario plausible?” Mortgage underwriters are incredibly sharp. They are specifically trained to mitigate risk for a mortgage company by documenting, questioning and leaving no stone unturned.

And the proximity of your job from your prospective new home is something they will scrutinize.

How a Long Commute Can Affect Your Mortgage

Let’s say you’ll work two hours away from your new home, leaving you to commute four hours per day, five days per week. Such a scenario would be difficult for an underwriter to believe without some additional layer of support detailing the unique circumstance.

Maybe in this type of scenario you have the ability to telecommute, where you commute a few days per week and work from home on the other days. Perhaps your job description letter from your human resources department could explain the nature of your occupation, how important traveling is to your job and what percentage of your job requires traveling. This is the type of documentation mortgage companies want to see. If your job proximity is an unexplained factor on your loan, then an underwriter could change your transaction to an investment property. This would come at a cost of higher rates, fees and a subsequently higher monthly payment even if your intention is to live in the home.

Generally speaking, an hour commute from where you work to where you will be living is acceptable. Anything beyond an hour commute will open up questions, prompting the need for detailed explanations and more paperwork.

Be clear and upfront with your mortgage company about what it is you’re trying to accomplish. Make sure your documentation supports your scenario well. Alternatively, in some cases, it might be better to structure the home as a second home, especially if you live in one property the majority of the week and an alternative home on the weekends, for example. What you have to reveal within your proposed scenario will dictate the loan structure.

What’s Considered a Primary Residence?

As long as the scenario can be justified on paper, documented and explained, and if your true intention is to live in the home, it is a primary residence transaction and is considered as such on your loan application. The more unique your scenario is, the more specific you’ll need to get in documenting that the home you are financing is in fact a primary residence. The following things would be needed to document such a scenario:

  • letter of explanation
  • job description specifically identifying travel time requirement
  • documentation supporting the commute time
  • offer letter from new employer stating job acceptance if relocating

What’s Considered a Second Home?

Your transaction could be considered a second home if the property is more than an hour away from work and is in a resort-type area. If the underwriter determines it to be a second home, you’ll be required pay at least 10% down.

What’s Considered an Investment Property?

This can be the most dreaded scenario for someone who’s intending to actually occupy the home. Let’s say a loan is sent to underwriting as a primary home or second home, but something in the file with the location does not jibe with the believability of the transaction – then the underwriter determines it to be an investment property, which requires 20% down.

Typically, it would not make sense if the property you are planning to buy is right down the street from your primary home as secondary residence; it’s an investment property. The home would have to be a reasonable commute time from the primary home — up to an hour away — for the loan to hold water as secondary residence. If the property is a vacation rental, for example, it could be a tough nut to crack if you plan to finance the home as second home, especially if tax returns identify the property as a rental. Tax returns hold all the cards in residential mortgage lending. As far as proximity to your home, an investment property has no limitation; it could be a few miles away or hundreds of miles away.

Because the way the loan is structured can greatly affect the cost of your home, it’s important to have a good idea ahead of time to know how much house you can afford (this calculator can help you figure that out). This is why it’s also important, if your loan has any “outside the box”-type structure to it, to make sure you work with a loan officer who has a thorough knowledge of the underwriting process, which can only be acquired through years of experience.

Your credit score is also a big factor in how much your mortgage can cost you, so check your credit far in advance of shopping for a home to determine whether you need to take some time to build your credit. You can get your credit scores for free from many sources, including Credit.com, to see where you stand.

More on Mortgages & Homebuying:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team