When you purchase a home, you’re buying shelter, a lifestyle, a community….and a commute. Before you write an offer, you might want to make a “dry run” from the property to your office during commuting hours to see if you can stomach the experience and the cost.
Don’t be “that guy”
Remember Falling Down? In that 1993 classic movie, Michael Douglas’ very bad day begins with a slow, smoggy, honking commute and ends with him hunting down his ex-wife and shooting a policewoman. Sure; it’s just a movie, but real-life road rage is not fiction. If gassing up twice a week and jacking up your blood pressure twice a day isn’t your style, think again before moving too far from your workplace.
Taking things too far?
The U.S. Census Bureau says that 10.8 million people (8.1% of workers) commute an hour or more to work each way. These extreme commuters risk damaging their health — a 2012 study of over 4,000 commuters in the Dallas-Fort Worth area found that people who drove longer distances to work were less physically active and experienced increased body mass index (BMI), waist circumference and blood pressure. In addition to health-related costs, direct commute-related expenses can derail the budgets of careless home buyers.
Commuting costs and home affordability
If the reason you want to move an hour from your workplace is to qualify for a larger house, keep in mind those hidden commuting costs – even though your mortgage lender doesn’t count them in your debt-to-income ratio, you still have to pay them. If you don’t factor in your daily travel, you could find yourself in a home with a very expensive commute that you can’t realistically afford.
A study by the Urban Land Institute concluded that when commuting expenses were added to housing costs, folks in the suburbs paid more overall than those living closer in, even though their housing costs were lower.
“What we have too frequently thought is that you can get an affordable house if you drive until you qualify, but if you then overlay the costs of transportation, they get very high,” said Henry Cisneros, an Urban Land Institute board member and former Secretary of Housing and Urban Development.
Change your location – or your mortgage
Weigh your options, do your homework and determine whether taking on a larger financial obligation is in your best interest. One solution is to buy a home that’s closer to the office, thus reducing day-to-day travel. You may, of course, have to buy a smaller house.
You could also pick a loan to minimize your monthly payment. There are a number of mortgages available today with fixed and adjustable rates. Check out a hybrid adjustable rate mortgage, which offers a fixed rate for an introductory period of three, five, or seven years. Rates on 5/1 ARMs run about one percent lower than those of 30-year fixed-rate mortgages. On a $300,000 loan, paying three percent instead of four percent saves you over $10,000 in five years – about 2,500 gallons of gas.