Is There A VA Loan Commuter Rule?
The VA rulebook requires lenders to consider many factors of a borrower's life, one of which is their commute to work. While there is no explicit rule limiting the distance from work to home, borrowers should understand how commuting distance can affect the VA occupancy rule, their debt-to-income ratio (DTI) and ultimately, their borrowing power.
All VA loans include an occupancy requirement that the borrower must occupy the property paid for by the loan as their primary residence. As a part of this, VA loan underwriters may evaluate commuting distance to confirm the home is within a reasonable proximity of the owner's place of employment. While the VA doesn't specifically define "reasonable proximity," most lenders issuing VA-backed loans will specify the number of allowable commuting miles per month through their loan programs.
To meet the occupancy requirements, borrowers must stay within the lender's allowable commuting miles per month or must be able to afford a commuting surcharge for every mile over the allowable limit and still stay within the specified debt-to-income ratios. In addition, borrowers must not plan to use the home as a secondary home or investment property, and they must not use a part-time residence closer to work. However, intermittent occupancy may be allowed for job purposes (i.e. a truck driver) as long as no secondary residence is established away from the property secured by the VA loan.
Remote positions and flexible work arrangements are increasingly common in today's post-pandemic environment. Borrowers with work-from-home arrangements should ensure their mileage is being counted accurately. A statement from the employer outlining the arrangement, including how many days per week are in-office versus work-from-home, should satisfy underwriting requirements and monthly mileage calculations.
So how do commuting miles affect VA loan eligibility? Each mile over the monthly allowance is considered an additional commuting expense that counts against a borrower's DTI. To account for the additional gas and vehicle maintenance that come with routinely long commutes, lenders will typically add a nominal amount, approximately $0.50 per mile, to the borrower's monthly expenses. Since expenses count against income in the DTI ratios, even a few hundred dollars in excess of mileage charges can have a significant impact on purchasing power.
Typically, lenders are looking to approve borrowers with a DTI of 41% or lower. If monthly expenses are already taking a sizable chunk out of your income, additional commuting costs can significantly limit the qualifying loan amount that will keep you under the 41% DTI threshold. While there are some exceptions to the DTI percentage rule, staying within the allotted commuting distance guidelines can help avoid potential loan qualification issues down the road.
Each lender will look at commute time and costs differently, but most will disclose monthly commuting miles that fall under the reasonable proximity threshold. Calculating commuting distance is only important if your commute exceeds this monthly allowance.
A quick approximation of commuting miles can be determined by multiplying the miles in a daily round trip commute by the number of workdays per week, then multiplying that total by the number of weeks per year. This annual mileage total is then divided by 12 (months per year), resulting in average monthly commuting miles. For example, here's the formula for a borrower that drives 45 miles to work each way (90 miles total):
This approximation can help you determine whether your commute may be pushing the limits for your lender. Each lender views job commute and excess mileage differently, so be sure to speak with your lender for more specific details about the impact of your commute on your loan qualifications.
For help with your VA loan commuting distance questions and other VA loan eligibility issues, get in touch with a VA lender today.
