How to get a mortgage for travel nurses
Overtime. Night shift differential. Employment gaps. These are all things your mortgage lender may have a hard time with. As a travel nurse, employment gaps are the norm, and proving your true income to a mortgage lender can be tricky.
Lenders tend to like “inside-the-box applicants”: the kind that work nine to five, make the same amount each month, and are never between jobs. But that’s just not a reality for the typical travel nurse — and that’s okay.
It’s possible to get approved for a mortgage despite the unique challenges that travel nurses face when trying to buy a home. Here are some special mortgages for travel nurses and strategies you can use to get your application approved.
In this article (Skip to…)
- Overcoming obstacles
- How to get approved
- Housing programs
- Mortgage options
- Is buying worth it?
- Managing student debt
- Check your eligibility
This article was created in collaboration with former travel nurse recruitment manager and current content and social media director at Nurse.org, Angelina Gibson.
Overcoming mortgage obstacles as a travel nurse
As a travel nurse, you may be wondering if you’ll ever qualify for a mortgage. A loan officer may have told you no due to a lack of “stable income.” Or you may know a colleague who has gone through that experience.
Below are common obstacles travel RNs face and how you can deal with them.
1. Unstable employment history
Loan officers often don’t understand the nature of a travel nurse’s work. On paper, it might appear to a lender that you are a contract employee or “job-hopper” because your contracts are typically only 13 weeks long and you move from agency to agency.
Your work history appears quite stable to you. You can pick up another contract as soon as the previous one is done. If all else fails, you’ll pick up per diem work or (gasp!) become a staff nurse. But that’s not how the lender sees it.
Keep in mind the kind of applicants lenders like to see: full-time, salaried employees with stable income and no employer changes. That’s just not a realistic standard for travel nurses, and that’s okay.
Here’s how you can get qualified for a mortgage loan despite your “unstable” situation:
- Write a letter of explanation. Describe the nature of travel nursing. Add details such as why your specialty is in high demand and that there is virtually no shortage of contracts you can take. Explain why travel nurses like yourself are extremely sought-after. “This is probably your strongest option, and you shouldn’t have any problems provided you have documentation,” says Jon Meyer, The Mortgage Reports loan expert and licensed MLO
- Get two years of travel nursing under your belt. History, history, history. This is what the lender wants to see. It’s tough to average three months of income. However, 12-24 months of travel nursing experience will give the lender more confidence in your ongoing earning potential
- Take a W2 assignment and stick with one agency if you're a new traveler. If you plan to start traveling, pick one agency to work for and make sure they pay you as a W-2 employee. A lender may still consider you non-self-employed if you are simply moving to another company
- Keep your paystubs, W-2s, and agency contact info. Your lender may need information from each of the agencies you’ve worked for. Keep all your pay statements and year-end documentation from each agency. Keep handy a contact name and number at the agency that is willing to complete a “verification of employment” for your past work, and even write you a letter regarding your previous history
- Use staff RN experience as part of your employment history. If you are a travel nurse, you will likely be considered self-employed. This is true even if you receive some W2 pay along with your 1099 (contract) pay. Lenders need a two-year history of self-employment to use the income to qualify. If you have been a travel nurse for less than two years, but at least one year, your previous staff nurse experience might help
Here’s what FHA guidelines say: “To be eligible for a mortgage loan, the individual must have at least two years of documented previous successful employment in the line of work in which he/she is self-employed, or in a related occupation.” (emphasis added). Conventional loans use a similar rule.
In short, you might be able to add your staff RN experience to your more recent travel RN experience to verify enough self-employed history. However, if you have been traveling for less than a year, you likely need to get at least 12 months of experience before you can qualify for a mortgage.
2. Employment gaps
Travel nurses may take long periods of time off between assignments. For example, you’ll work for six months, save money, then take 1-3 months off for leisure. That’s just part of the travel nurse lifestyle. Also, the time between one contract ending and your next contract could be 1-2 weeks.
Is this considered a “gap in employment” by a mortgage lender?
How long is a gap in employment?
That depends on the type of loan you’re getting.
FHA defines an “employment gap” as at least one month. Conventional loan regulator Fannie Mae doesn’t set a specific time, but says that lenders must look at the history of any variable income and determine if any gaps are consistent over time or longer than usual.
If longer than usual (or more than one month for FHA), you’ll need a letter explaining the time you had away from work.
What’s the “secret” to qualifying when you have employment gaps?
In a word, job history. You’ll need to build up at least 12 months, but preferably 24 months, of history as a travel nurse. There are a couple of reasons for this.
- First, you need to prove how long a “typical” employment gap is
- Second, the lender needs to average your income including any gaps and various pay rates. That also takes time
As mentioned in the previous section, get as much history as a travel nurse as you can. If you plan to become a travel nurse next year, but you also want to buy a house, you might consider starting to travel now.
Write a great letter of explanation
Mortgage lenders don’t know the ins and outs of the nursing industry, let alone the travel nursing industry. So write a detailed letter of explanation about how travel nursing works. Put it in context for the lender.
That letter can go a long way toward your approval. You could also request a letter from your recruiter or agency HR department. A letter on letterhead from the company explaining the travel nursing process will help your case.
3. Variable income
Travel nurse pay is seasonal and varies by contract and location.
For example, a travel nurse working in California will often make more than a nurse working in Florida. Additionally, hospitals will pay travel nurses more to work in Wisconsin during the winter. (No one wants to be stuck in a snowstorm.) There are also states where travel nurses like to work (Hawaii) just for the experience, and hospitals in these locations can pay lower because of the lifestyle.
Each individual contract is negotiated differently — agency by agency and hospital by hospital. But how do you explain all this to an underwriter when applying for a mortgage?
One thing lenders do understand is seasonable work and variable pay. Lots of industries — construction, agriculture, and others — are variable in nature. The key is getting enough history.
Get at least 12 months’ stable income history, but preferably 24 months, before applying for a mortgage. Keep everything: contracts, pay stubs, W2s, and offer letters. You can get approved if the lender can average out the variable and seasonable pay over a reasonable amount of time.
According to Fannie Mae, the nation’s lead mortgage rule maker, “Two or more years of receipt of a particular type of variable income is recommended; however, variable income that has been received for 12 to 24 months may be considered as acceptable income, as long as the borrower’s loan application demonstrates that there are positive factors that reasonably offset the shorter income history.”
So if you have at least a year under your belt, it can’t hurt to apply for a home loan.
4. Taxable and non-taxable income
Most travel nurses receive their pay in the form of taxable, plus non-taxed income.
The non-taxed portion of their pay is per diem pay. Per diems are reimbursements for meals, housing, travel, and incidentals while they are working away from their “tax home,” an IRS term meaning where they live when they’re not traveling for work.
Per diem income is not considered by the IRS to be income or compensation.
However, travel nursing agencies do include this pay on the nurse’s paycheck. And, many agencies bump up per diem pay, and pay lower rates for the actual work. This is advantageous for nurses at tax time, but not so much for when they apply for a mortgage.
A travel nurse’s pay may appear to a lender to be much lower than it actually is. This is why it is important for travel nurses to educate themselves on taxable/non-taxable pay. Per diems could be considered a liability.
Can per diem pay be used to qualify for a mortgage?
Fannie Mae and other rule-making agencies — like the Department of Housing and Urban Development (HUD), which oversees FHA — don’t address most per diem pay specifically. Therefore, some underwriters may be able to use it while others won’t. It’s up to each individual lender.
The fact that it doesn’t show up on tax returns doesn’t help. Typically, a lender uses tax returns to verify a stable income history. In any case, keep all your contracts, pay stubs, and any other paperwork that documents your pay structure.
One bright spot is around housing stipends. Fannie Mae states that you can use housing reimbursement as qualifying income if it has been received for the most recent 12 months and is likely to continue for three years.
Should you agree to receive non-taxable income?
Gibson says, “If I were giving advice to a travel nurse who wants to buy a home someday, I would say to take as much money as possible in taxable pay, rather than per diem. It’s just too much of a risk to work for two years, only to discover a lender can’t use all that income history.”
And if you’ve already got a history of high per diem pay? You might as well try to apply at a few lenders. They might say they can’t use the income to qualify. In that case, start negotiating lower per diem pay and higher base pay. Starting immediately will increase your average pay and help you qualify sooner.
If you’re really in a hurry to buy, you could take a staff nurse position. You can most likely use your pay structure to qualify after a few months of pay stubs, or in some cases even just an offer letter.
That may seem drastic, but mortgage rules do not state you can never change jobs again. Once your loan closes (and you feel comfortable with your new house payment), you are free to explore other job opportunities including travel nursing again.
How travel nurses can buy a house
The Mortgage Reports asked former travel nurse recruiter and current content director for Nurse.org, Angelina Gibson, for her advice to nurses looking to buy in the near future. Here’s what she had to say.
1. Save all travel nursing contracts
Keep physical copies of the contracts between yourself and your travel nursing agencies for all your travel nursing assignments.
Your broker will ask you to explain all gaps in employment and to also provide proof of consecutive assignments. It is also a good idea to keep copies of your contracts online in a cloud service like Dropbox or another digital format for easy access.
If you are able, save copies of your pay stubs. You should also be able to ask your agency for a copy of your deposits. Keep in mind that some agencies may not keep these records or they may not be readily accessible. Save yourself the hassle by keeping all your own records.
2. Avoid non-taxed stipends and low taxable income
If you’re planning to buy a home in the near future, do not accept travel nursing assignments with high non-taxed stipends and low taxable pay. Though it may be tempting at the time to accept an assignment offering a low taxable hourly rate and high non-taxed stipend, it will not be worth it in the long run. Especially if you have plans to purchase a home.
Why? Because non-taxed stipends are not considered wages by the IRS, your broker may not count the stipend as income. If your taxable hourly rate is too low, it may decrease the amount of your loan.
As a rule of thumb, I recommend rejecting assignments offering a taxable hourly rate of less than $39 per hour, the national average hourly pay for registered nurses.
3. Understand IRS tax guidelines for traveling/contract workers
Travel nurses are paid very differently than staff nurses. That’s because they travel for work and receive non-taxed stipends to help with housing and living expenses while they are away from work on assignment.
Why do travel nurses receive non-taxed stipends? Because they are duplicating expenses. This means that they are maintaining a tax-home residence while maintaining a temporary residence where they are working a travel nursing assignment.
The IRS considers non-taxed stipends reimbursements, not wages. As a travel nurse, it is up to you to understand why you are eligible for non-taxed stipends, and to make sure that you are paying the appropriate taxes when required.
Get acquainted with IRS publication 463 for additional information regarding travel, entertainment, gift, and car expenses.
4. Maintain a tax-home
If you are a travel nurse and are receiving non-taxed stipends, you must maintain a tax-home.
There are three requirements to establish and maintain a tax-home. Travel nurses must meet two out of three of the requirements to be eligible to receive non-taxed stipends. If you do not meet at least two of these requirements, you should not be receiving or accepting non-taxed stipends.
The requirements include:
- Maintain regular employment within the area of your tax home
- Maintain a permanent address within your tax home area. The permanent address must be a physical address, not a P.O. box. You must also maintain the residence while you are away for work. This includes paying the mortgage, handling repairs, and paying utility bills.
- Do not abandon your tax home. Travel nurses must return to their tax-home area about every 12 months to work (this helps maintain requirement no. 1.) We recommend working in your tax-home area for at least 30 days per year. Otherwise, the IRS may assume that you’ve abandoned your tax-home, in which case you are not eligible for non-taxed stipends because you are not duplicating expenses.
By understanding travel nurse taxes and the non-taxed stipend, you are setting yourself up for the best-case scenario for purchasing a home.
Special housing programs for travel nurses
Many nurses wonder if there are special home loan programs specifically for RNs. They may have heard of doctor loans and wonder if there are similar home purchase options for nurses.
There are two popular nationwide programs that provide home loans for nurses and other healthcare professionals: Nurse Next Door and Home for Heroes.
Nurse Next Door
The Nurse Next Door program is a home buyer assistance program that helps to match RN borrowers with the best mortgage, property, or aid program for their financial situation. According to the program’s website, “housing grants of up to $8,000 are available to ALL healthcare employees, including nurses, medical staff and doctors.”
The site further explains that borrowers may be eligible for down payment assistance of up to $10,681. You may also get reduced closing costs through the elimination of a home appraisal and other fees.
Homes for Heroes
Homes for Heroes is a nationwide housing program that aims to make home buying more affordable for first responders, teachers, military, and healthcare professionals.
The website says, “Most heroes save at least $3,000 when they buy or sell a home with us. When you add up the savings from real estate agents, loan officers, title companies, home inspectors and other everyday deals, the savings is way beyond what you’ll get from other national programs.”
Down payment assistance programs
Down payment assistance (DPA) programs offer grants and low-interest second mortgages to help healthcare professionals, firefighters, law enforcement, educators, and other first-time home buyers afford a house. The money you get can be used for your down payment and often closing costs, too.
There are thousands of DPAs nationwide and each is managed on a city, state, or county level. This guide will introduce you to DPAs in every state, and your real estate agent or Realtor should have additional information for programs near you.
Mortgage loan options for travel nurses
In addition to nurse home loans, standard loan types are worth looking into. Contrary to popular belief, no home loans today require a 20% down payment. The following popular loan types can all offer affordable financing to first-time home buyers.
Also known as conforming loans, conventional mortgages are the most common home purchase loan available, and their rules are set by Fannie Mae and Freddie Mac. Some first-time home buyers may qualify with as little as 3% down.
While anything less than 20% down requires private mortgage insurance (PMI), conventional loans may still be advantageous even with that extra expense. Plus, you don’t have to save forever to make that huge down payment. These loans are best for borrowers with good credit and at least 3-5% down.
Backed by the Federal Housing Administration, FHA loans require just 3.5% down and are very flexible on employment gaps, changes in work history, and credit score. These are the go-to loans for first-time home buyers who don’t fit into the conventional loan “box” and require leniency on certain aspects of their financial situation.
Guaranteed by the United States Department of Agriculture, USDA loans may be the best-kept secret in mortgage finance. They require no down payment whatsoever and no ongoing mortgage insurance. But they do come with income limits, and you must purchase a house within an eligible rural area. Beyond those requirements, USDA loans are not that different than other home purchase loans.
For nurses with military service in their backgrounds, VA loans may be the best mortgage option available. They require zero down and are lenient about credit scores and income types. These loans typically require a two-year history of active service or six years in the Reserves to be eligible.
Is it worth it to buy a home as a travel nurse?
One concern travel nurses have is what they will do with the home while you are gone on travel nurse assignments. Why pay all that money when you’re not there?
- One option is that you can break even or even make money by using your home as a short-term rental while you are gone
- You could also opt for a roommate (long-term renter) who looks after the house and provides ongoing passive income when you’re not home
These practices are allowed by mortgage rule-making agencies, to some extent. Just remember that you have to actually move into the home and live there while you are not traveling.
Most mortgage rules say you have to move into a home within 60 days of buying it. So make sure you can do that even if you have some extended contracts coming up.
If you plan to set up some short-term rentals, get familiar with Airbnb and consider hiring a property management company. You likely won’t want to be handling bookings and other details while working 12-hour shifts a few states away.
Many companies will manage your property for 10-20% of your rental fee. There are plenty of companies to choose from, but do your homework before selecting one. Make sure they provide the services you need, and aren’t too expensive. Check out Airdna’s list of recommended management companies.
Finding good renters as a travel nurse
Are you worried about renting your new home while you’re away on assignment? That’s understandable.
One option is to simply put up an ad in a travel nursing forum or Facebook group, and only rent to fellow travel nurses who will be in your area.
Because of a shared profession and online community, there’s instant trust and accountability between you. You are much less likely to get taken advantage of or incur damage to your new home.
Tips for buying a home with student loan debt
Many nurses — especially newer ones — have debt from college and nursing school. In fact, a lot of nurses are traveling to pay off debt because they make more money than if they worked on staff.
Staff nurses are dealing with high student loans now, too. Many hospitals are pushing for 4-year degrees for nurses. Nursing school is great, but its costs can affect a nurse’s debt-to-income ratio, or DTI.
What is DTI? It’s the relationship between income and debt. For instance, your DTI is 50% if you make $5,000 per month before taxes and have $2,500 in debt payments (student loans, auto loans, credit card payments).
Most underwriters want to see a DTI of 43% or less, including your future home payment. So it’s easy to see why $500, $700, or even $1,000 per month in student loan payments can hurt your chances of buying a home.
Tips for buying a house with a high DTI
Following are some strategies to work around student loans.
- Pay off high-interest debt first. Don’t concentrate on your huge student loan balance. Pay off a car that has a high payment but a low balance. You want to eliminate as many high payments as possible, and a debt with $0 balance also comes with $0 payment
- Have the lender calculate your payment correctly. Lenders will “hit” you with a student loan payment equal to the actual payment, or 1% of the balance if it’s a deferred loan or the actual payment is not otherwise calculable. If you are on an income-driven repayment plan, the lender can use that lower payment instead of what would be owed if not on the program
- Remove debt payments paid by others. Are parents footing the tab for your student loan (or any other debt)? The lender can remove that from your DTI calculation if another party has been paying it for 12 consecutive months
- Refinance your student loans. When it comes to debt, lenders only care about the payment, not the balance or repayment period. Reduce your student loan payment with a lower interest rate, longer loan term, or a combination of the two
Student loans are no joke if you’re trying to buy a house. Fortunately, there are ways to qualify despite high payments.
Are you ready to see if you qualify?
There are hurdles to overcome when buying a house as a nurse or travel nurse. That’s certain. But a home can be a great investment and a place to set down roots.
Remember: there’s no harm in applying for a mortgage. It won’t significantly hurt your credit score. And even if you are not approved, at least you’ll know what you need to do to get on the road to homeownership.