Mortgage lenders turn a blind eye to the transportation costs of homebuyers, and that’s bad for borrowers, banks, and urbanism.
When a bank is deciding whether or not to lend you money to buy a home, they don’t really care whether you can afford to repay the loan, because they’re not holding on to your mortgage. It’s more likely that your small neighborhood bank plans to sell your loan to a larger financial corporation that will either sell it again or make mortgage sausage with it. So what the loan officer is really worried about is whether your loan appeals to these big companies, that is, whether it meets Fannie Mae and Freddie Mac guidelines. These guidelines usually come close to approximating a borrower’s ability to repay, but they have a glaring flaw that’s also bad for cities: they don’t account for transportation costs.
The lender knows where the borrower lives. The lender knows where the borrower works. But the lender refuses to infer anything about the financial cost of the borrower’s regular commute between these two places. This doesn’t make any sense. Transportation costs are easily predictable and have a direct bearing on a borrower’s ability to repay the loan.