Are you ready to buy a house but finding it difficult to get approved for a loan as a travel nurse? The unconventional structure of travel nursing careers can present hurdles when it comes to applying for a mortgage. Here’s everything you need to know about why this process is trickier for travelers – and what you can still do to become a homeowner.
Why is buying a house hard for travel nurses?
Buying a house as travel nurse can be frustrating, especially when you don’t understand why you may be getting denied for a loan. Although travel nursing is an awesome career, many lenders prefer working with traditional 9-to-5 jobs. Here are some of the reasons your application for a home loan may be getting denied, followed by what you can do about it.
Unreliable employment history
While most people have the same job for years, you’re switching jobs every few months as a travel nurse. That’s totally 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 and you may work with multiple agencies.
Gaps in employment
Another thing that lenders tend to shy away from is gaps in employment. One of the beauties of travel nursing is being able to take off as much time as you want in between assignments, 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.
Variable income
Lenders also like to see applicants who make the same amount of money each month. However, travel nurse 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 COVID-19 was higher, and each agency and facility negotiates contracts differently.
Additionally, tax-free stipends are usually boosted as much as possible in travel contracts. However, 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, but it may be confusing and appear risky to underwriters. 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. Here 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 don’t understand how travel nursing works. One of the best things you can do is write a detailed letter of explanation about how your job as a travel nurse works. Explain how your specialty is in high demand and how there are no shortage of contracts available.
It might help to explain how travel nurse pay works, including details about how it varies and what the breakdown of your pay looks like (stipends, base rate, overtime). You should also mention:
- The planning that goes into picking assignments and locations
- Your income
- Credit score
- Professional references
You could also ask for your recruiter or agency 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.
Take fewer tax-free stipends
Since per diem income and tax-free stipends aren’t considered "income" by the IRS, your income may look a lot smaller to a lender than it actually is. However, Fannie Mae allows you to use housing reimbursement as qualifying income if you’ve received it for the last 12 months and are likely to continue to for three years.
Your letter of explanation may also help lenders understand your income, but they may be required to base your loan approval off your IRS reported income. If that’s the case, you may want to consider readjusting your contracts for two years so you’re taking home more money in your base hourly rate than you are stipends.
The kind of housing loan you’re applying for may also make a difference. For example, Federal Housing Administration (FHA) loans don’t specifically address stipends or per diem pay, so it may be 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 actually took home that year, so pay stubs are key for proving your true income. Submit pay stubs over W2s whenever possible, or at least include both.
A great way to keep your travel nurse paperwork organized is with a Fusion Marketplace profile! You can upload all your documents and keep a digital record of all your assignments and agency contacts all in one, secure spot with our custom profiles.
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 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 also 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.
Pay off debts
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% in order to get approved to buy a house.
One of the debts you may need to tackle as a travel nurse are student loans. Nursing school can be expensive, and those loans are probably affecting your DTI 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.
Seek advice from fellow travel nurses
It’s also beneficial to get advice from someone that’s been in your shoes before. Reach out to travel nurse homeowners and find out what mortgage companies and lenders they used and if they have any tips for securing a loan.
Travel nurse Facebook groups like Fusion Marketplace Connect are awesome for asking these types of questions and getting responses from experienced travelers across the nation.
Remember, there isn’t any risk to applying for a home loan and seeing how it goes. It won’t hurt your credit score and even if you get denied, you’ll have a better idea of what you need to do next time, or what you need to do to get there.
