Are you excited about purchasing a house but facing challenges in getting a loan as a travel nurse? Don't worry! Securing a mortgage can be more complex for those in unconventional travel nursing careers.
But fear not, because we've got you covered. Here's everything you need to know about why this process may be more challenging for travelers — and, most importantly, what steps you can take to achieve your dream of homeownership.
- Why is buying a house hard for travel nurses?
- How to buy a house as a travel nurse
- Frequently asked questions
The Ultimate Guide to Buying a House as a Travel Nurse
Why is buying a house hard for travel nurses?
Buying a house as a travel nurse can be frustrating, especially when you don't understand why you may be getting denied a loan. Although travel nursing is an awesome career, many lenders prefer working with those in traditional 9-to-5 jobs.
Here are some of the reasons your application for a home loan may be getting denied, plus what you can do about it.
Unreliable employment history
While most people have had the same job for years, you're switching jobs every few months as a travel nurse. That's normal for a travel nurse, but on paper, it might appear to a lender that you're a job-hopper when contracts are usually only 13 weeks long.
Gaps in employment
Another thing that lenders tend to shy away from is gaps in employment. One of the beauties of this industry is being able to take off as much time as you want in between each travel nursing assignment, but that can raise red flags for lenders who don't understand the industry. Any employment gaps larger than three months will need an explanation in writing.
Lenders also like to see applicants who make the same amount of money each month. However, a travel nurse's pay pay varies by season, contract, and location. For instance, what you get paid in one state might be very different from another, pay at the height of the coronavirus pandemic was higher, and each agency and facility negotiates contracts differently.
Additionally, tax-free stipends are usually boosted as much as possible in travel contracts. The catch is this money isn't reflected on W2s, which means your income is going to appear a lot lower than it actually is.
All these variables are normal for travelers' income history but may be confusing and appear risky to underwriters deciding whether or not to approve a mortgage loan. Without context, your variable income looks like a big risk.
How to buy a house as a travel nurse
For these reasons, it's important to take some extra steps to provide context of your job for lenders. It might seem over the top, but it's better to be safe than sorry when it comes to qualifying for a mortgage.
These are some steps you can take to increase your odds of getting approved for a home loan.
Write a letter of explanation
Most mortgage lenders (and real estate agents) don't understand how travel nursing works. One of the best things you can do when buying a house as a travel nurse is to write a detailed letter of explanation about how your job works. Explain how your specialty is in high demand and how there is no shortage of contracts available.
It might help to explain how your travel pay works, including details about how it varies and what the breakdown of your pay looks like (think: stipends, base rate, overtime). Other things to include are:
- Details about the planning that goes into picking assignments and locations
- Information on your income and credit score
- Professional references
You could also ask for your Fusion Medical Staffing recruiter or HR department to send a letter on your behalf. An official letter from the source will help boost your case and provide even more context for your underwriter and loan officer.
Take fewer tax-free stipends
As a travel nurse, buying a house can be challenging due to how per diem income and tax-free stipends are not considered "income" by the Internal Revenue Service (IRS). This can make your actual income appear much smaller to lenders.
On the bright side, there are options available to help you qualify for a mortgage. For instance, Fannie Mae allows you to use housing reimbursement as qualifying income if you have received it consistently for the past 12 months and are likely to continue receiving it for the next three years. Additionally, you may find other mortgage lenders offering better-than-average deals.
Providing a letter of explanation can also assist lenders in understanding your income situation. Keep in mind that some lenders may still need to base your loan approval on your IRS-reported income. In such cases, it might be worth considering adjusting your contracts to prioritize a higher base hourly rate over stipends for two years, resulting in a higher take-home pay.
It's also important to consider the type of housing loan you are applying for. For example, Federal Housing Administration (FHA) loans do not specifically address stipends or per diem pay, potentially making it easier to get approved for this type of loan.
Keep detailed records
A well-documented paper trail is crucial when it comes to being approved for a home loan as a travel nurse. Keep copies of paystubs, W2s, contracts, and agency contacts. Your application may go quicker if you keep a contact name and number from each agency you've worked for that could verify your employment, or even write a letter regarding your employment history with them.
Remember, your W2 is going to list a much lower income than what you took home that year, so paystubs are key for proving your true income. Submit paystubs over W2s whenever possible, or at least include both with documented previous successful employment.
Ensure you have enough experience
With context and proof, lenders will be more likely to understand your contract work, but getting enough history of this type of work is still necessary. At the very least, you'll need to build up at least 12 months of history as a travel nurse, and 24 months is even better.
This history helps show lenders how long your employment gaps usually are and it helps them average your income with gaps and various pay rates in the mix. The more time you have on your side, the better your average and the confidence in your earning potential will be.
If you don't have two years of experience as a travel nurse under your belt yet, you can use staff registered nurse (RN) experience as part of your employment history if you have it. Extending contracts so you work longer at the same facility is another way to demonstrate consistency and stability in your work.
Maintain a tax home
Your lender may want to know what you intend to do with your home, and for you to prove that it will be your primary residence. As a travel nurse who permanently lives in a different place than where you work, this may be extra difficult to prove.
Explain the reason why you’re buying in one state while working in another and then provide proof that the place you’re buying will be your tax home. You can prove this by showing this is where you pay taxes, have a driver’s license, and have your cars registered.
Another great way to show you’re eligible for a home loan is to pay off debts. This is because lenders look at your debt-to-income ratio or DTI. You can find this ratio by dividing your monthly debt by your gross monthly income. It’s recommended that your DTI ratio is under 36% to get approved to buy a house.
One of the debts you may need to tackle as a travel nurse is student loans. Whether you have an associate degree in nursing or a bachelor's degree in nursing, nursing school can be expensive, and those loans are probably affecting your debt-to-income ratio. Check out student loan forgiveness programs or start practicing a debt repayment method to get your DTI down and increase your chances of qualifying for a home loan.
You'll also want to bulk up on credit card payments and keep an eye on credit scores.
Save up for a down payment
No matter how much effort you put into the home-buying process, it's still a significant investment. While a huge down payment isn't necessary, having some upfront money makes it much easier to secure home loans.
Most of the time, you don't have to put down a full 20%, especially if you're considering FHA loans. But it's important to be aware of private mortgage insurance (PMI), which is typically a monthly premium added to your mortgage payment if your equity is less than 20% of your home's value. This is common for most conventional loans, and although the fee isn't substantial, it does accumulate over time.
That being said, with the increasing costs of housing and living expenses, opting for a mortgage over renting often proves worthwhile. Just make sure to save enough to cover closing costs, which can sometimes catch new home buyers off guard.
Seek advice from fellow travel nurses
Have a travel friend who has purchased a house? Pick their brain! It's helpful to seek advice from experienced individuals who have been in your position before.
When purchasing a house as a travel nurse, connecting with other travel nurses is crucial for success. Reach out to travel nurse homeowners to gather insights on the mortgage companies and lenders they used, as well as any tips they may have for securing a loan through a mortgage lender.
There is no risk in applying for a home loan and assessing the situation. It will not harm your credit score, and even if your application is denied, you will gain valuable knowledge for future endeavors or to refine your approach.
Frequently asked questions
Can a travel nurse get an FHA loan?
Yes, a travel nurse can get a Federal Housing Administration (FHA) loan! These loans are government-insured, designed to help borrowers with lower income or less-than-perfect credit to purchase homes. FHA loans can be an excellent option for travel nurses, as they offer more lenient lending requirements compared to conventional loans.
While they do not specifically address stipends or per diem pay, the less stringent requirements potentially make it easier for travel nurses to get approved. However, it's crucial to remember that lenders will still consider the stability of your income and employment. Therefore, it's beneficial to provide a comprehensive explanation of your job, maintain detailed records, and demonstrate a consistent employment history when applying for an FHA loan.
Do nurses get discounts on a mortgage?
You bet, depending on the lender! Some mortgage lenders offer discounts and special programs for nurses, including travel nurses. These programs sometimes referred to as "nurse home loans," typically feature benefits such as lower interest rates, reduced closing costs, and looser loan requirements.
The availability and specifics of these programs can vary widely, depending on the lender and the nurse's circumstances. So, it's recommended that nurses shop around and research various lenders to find the best mortgage discounts available to them.
How do you calculate travel nurse income for a mortgage?
Calculating a travel nurse's income for a mortgage requires taking into account both taxable and non-taxable earnings. The taxable income includes the base hourly rate while non-taxable earnings encompass housing stipends, meal allowances, and other reimbursements. While these non-taxable earnings significantly contribute to a travel nurse's total income, they are typically not shown on your W2, which could lead to an understated income representation on your mortgage application.
As a travel nurse, becoming a homeowner may seem antithetical to your lifestyle, but it can actually present several unique advantages. Buying a home can be an excellent investment, offering more stability, and your own designated space to relax and recharge between assignments.