In this blog, we will cover employer distance requirements on primary home mortgages. Employer Distance Requirements On Primary Home Mortgages is a requirement on all loan programs. Lenders want to make sure that the distance from the new home purchase to their work location is reasonable. FHA, VA, and USDA loans (Government Loans) only offer primary home loans. Government Loans do not offer second home and investment property mortgages. Conventional Loans do allow second home and investment property mortgages. Homebuyers with remote jobs can purchase a home anywhere in the U.S.

Employer Distance Requirements For Remote Wage Earners

One of the mortgage lenders’ primary concerns is the proximity the homebuyer lives from their places of employment. For example, if an Illinois borrower is buying a primary resident in Tennessee, this will cause concerns for a mortgage underwriter. Let’s take a case scenario where a homebuyer is currently residing in Chicago, Illinois. We will say the employer is located in Chicago and they are purchasing a home in Tennessee.

Mortgage underwriters want to see that the wage earner is within commuting distance from work and their residence. The employer distance requirements need to be within driving distance unless the VOE say remote worker.

There are no branch offices within commuting distance in the area in Tennessee the homebuyer is buying the home. This will automatically alert the mortgage underwriter. The underwriter will need an explanation. Most explanations on this type of case scenario are the homebuyer is a remote wage earner.  Remote job positions are becoming more and more popular. The mortgage underwriter will want to see the documentation verifying this. Lenders will contact the employer via Verification Of Employment and address this issue. The VOE needs to state verbiage that the employee is a remote worker and does not have to report to a  brick and mortar physical location. Speak with us to get detail information in Employer distance requirements for Removte Wage Earners

Reason Lenders Are Concerned of Employer Distance Requirements

Mortgage lenders are concerned of employer distance requirements to confirm the borrower has the ability to repay. Without a full-time job or stable source of employment, people will have a difficulty with the ability to repay their new housing payment. Part of the verification of employment is the commuting distance between work and residence.

To confirm the borrower has a full-time employment, they need to be within commuting distance to and from work unless they are remote wage earners.

Mortgage guidelines related to remote work are based on the borrower’s situation. In this section, we will cover some general considerations. Lenders typically seek a stable income when approving a mortgage. If you have a remote job with a consistent income, it can be treated similarly to traditional employment. However, if your income is variable or you’re on contract, lenders may scrutinize your financial stability more closely.

Proof of Income of Borrowers

You’ll likely need to provide documentation of your remote work and offer employment, such as pay stubs, tax returns, or a letter confirming your employment and income. Remote work often allows employees to live anywhere, including areas with lower housing costs. Lenders may consider where you’ll live and its impact on the property’s value and marketability. Lenders typically prefer borrowers with a stable work history. It could raise red flags for lenders if you’ve recently transitioned to remote work or changed jobs frequently. Your debt-to-income ratio (DTI) is important in mortgage approval. Lenders will assess the borrower’s ability to repay the loan based on your income relative to your debt obligations. Remote work income will be factored into this calculation.

Credit History of Borrowers

The borrower’s credit history and credit score will still play a significant role in mortgage loan approval. Lenders will assess your creditworthiness based on the borrower’s payment history, credit utilization, and length of credit history.

Residency and Legal Status

Lenders will also consider your residency status and whether you’re legally allowed to work in the country where you’re applying for a mortgage. Communicating openly with your lender about your remote work situation is essential. Be prepared to provide any necessary documentation and address any concerns they may have about your income stability. Given the evolving nature of remote work and its impact on various industries, mortgage guidelines related to remote work may continue to evolve. Therefore, it’s always a good idea to consult a mortgage lender or financial advisor for the most up-to-date information and guidance tailored to your situation.

How Underwriters Classify Remote Wage Earners

Borrowers with a long employment history working from home as remote wage earners will not have as much scrutiny than those who just started as a remote employee. Mortgage underwriters will carefully analyze that the borrower is a legitimate remote employee and not stating they are remote workers for the sake of getting away with the employer distance requirements. As long as the borrower can get a letter by the employer stating they are a remote employee, the employer distance requirements are waived.

Rates and Down Payment on Primary Versus Second and Investment Homes

Government Loans (FHA, VA, USDA) are for primary home residences only. Fannie Mae and Freddie Mac allow for second and investment property loans. The main reason primary home loans are preferable is due to the following factors:

• Primary homes have lower mortgage rates
• Primary homes have lower down payment requirements
• Primary homes have lenient agency guidelines
• Primary homes have larger sellers concession guidelines

Primary homes have a higher debt-to-income ratio caps than second or investment homes.

Maximum Employer Distance Requirements and Guidelines

There are no set maximum Employer Distance Requirements for primary home mortgages. However, most lenders want to see that a homebuyer has a reasonable distance to their place of employment. In general, lenders want to see no more than a 60 miles distance from a borrower’s primary residence to their place of employment. This is exempt for remote employees. If the distance is more than 60 miles, each case will be evaluated on a case by case scenario. For more information about this article or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

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