Does Fha Allow Per Diem Income to be used for mortgage qualification? Yes, under specific conditions, the Federal Housing Administration (FHA) does allow per diem income to be considered when applying for a mortgage, a crucial factor for travel nurses. At income-partners.net, we understand the unique financial landscape of travel nurses and provide resources to navigate the complexities of mortgage applications and income verification, ensuring you have the best opportunity to partner with the right lender and secure a favorable mortgage. Explore our site for partnership opportunities and strategies to increase your income potential, find the right relationships, and leverage the potential of per diem income in your mortgage application, optimizing your debt-to-income ratio and overall financial profile for success in the housing market.
1. Understanding Mortgage Options for Travel Nurses
Are you a travel nurse exploring homeownership but facing hurdles due to your unique employment situation? Many travel nurses encounter challenges when seeking mortgages due to variable income, frequent job changes, and the complexities of per diem pay. However, understanding the landscape of mortgages tailored for travel nurses is the first step to overcoming these obstacles.
Travel nurses often find traditional mortgage lenders hesitant to approve their applications because of the perception of unstable income and employment. Unlike the typical 9-to-5 employee, travel nurses have contracts that last for a limited period, and they move from agency to agency, potentially creating gaps in employment. But this shouldn’t deter you. Specialized mortgage options are available that consider the unique aspects of your profession.
1.1. Key Strategies for Travel Nurses Seeking Mortgages
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Document Everything: Keep meticulous records of your contracts, pay stubs, W-2s, and any other documentation that substantiates your income.
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Establish a Solid History: Aim for at least two years of travel nursing experience to demonstrate a consistent income history.
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Understand Per Diem Pay: Be aware of how per diem income can impact your mortgage application and how to best present it to lenders.
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Consider Special Programs: Explore programs like Nurse Next Door and Homes for Heroes, which offer assistance to healthcare professionals.
By understanding these key strategies, you can better prepare yourself for the mortgage application process and increase your chances of approval. Income-partners.net offers valuable resources and partnerships to help you navigate these challenges and achieve your homeownership goals.
2. Overcoming Employment History Hurdles
One of the primary challenges for travel nurses when applying for a mortgage is the perception of unstable employment. Loan officers, accustomed to traditional employment patterns, may view frequent contract changes and gaps in employment as red flags. However, with the right approach, you can effectively address these concerns.
2.1. Addressing Unstable Employment History
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Letter of Explanation: A well-crafted letter explaining the nature of travel nursing can go a long way. Describe why your specialty is in high demand and the abundance of available contracts. According to loan officer Jon Meyer, documentation and clear explanations are key.
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Two Years of Experience: A solid history of 12-24 months of travel nursing experience provides lenders with more confidence in your earning potential.
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W-2 Assignments: If you’re new to travel nursing, working with one agency as a W-2 employee can demonstrate stability.
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Comprehensive Record Keeping: Maintain detailed records of pay stubs, W-2s, and agency contact information.
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Leverage Staff RN Experience: If you have less than two years of travel nursing experience, combine it with your previous staff nurse experience to establish a sufficient employment history.
FHA guidelines state that to be eligible for a mortgage loan, individuals must have at least two years of documented successful employment in their line of work or a related occupation. Conventional loans follow a similar rule. Income-partners.net can connect you with financial experts who understand these guidelines and can help you present your employment history in the most favorable light.
2.2. Visualizing Employment History
| Time Period | Employment Type | Agency/Hospital |
|---|---|---|
| 2022-2023 | Staff RN | City General Hospital |
| 2023-2024 | Travel RN | ABC Travel Agency |
| 2024-Present | Travel RN | XYZ Nursing Corp |
3. Navigating Employment Gaps
Gaps between assignments are a common part of the travel nurse lifestyle. Whether it’s for leisure or waiting for the next contract, these gaps can raise concerns for mortgage lenders. Understanding how lenders view these gaps and how to address them is essential.
3.1. Understanding and Addressing Employment Gaps
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Defining an Employment Gap: FHA defines an employment gap as at least one month. Fannie Mae doesn’t specify a time but requires lenders to assess the consistency of variable income and the length of any gaps.
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Qualifying Despite Gaps: Build a history of at least 12 months, preferably 24 months, as a travel nurse to establish a pattern and demonstrate how typical your employment gaps are.
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Letter of Explanation: A detailed letter explaining the nature of travel nursing and the reasons for your employment gaps can significantly impact your approval.
Securing a mortgage with employment gaps requires proactive communication and a thorough understanding of lender requirements. Income-partners.net provides resources and expert advice to help you navigate these challenges effectively.
4. Managing Variable Income
Variable income is another common challenge for travel nurses seeking mortgages. Pay rates can vary significantly based on location, contract, and seasonal demand. Demonstrating a stable income history amidst these fluctuations is crucial for mortgage approval.
4.1. Strategies for Managing Variable Income
- Establish Income History: Aim for at least 12 months of stable income history, preferably 24 months, before applying for a mortgage.
- Document Everything: Keep contracts, pay stubs, W-2s, and offer letters to provide a comprehensive record of your income.
- Understand Lender Requirements: Familiarize yourself with Fannie Mae guidelines, which recommend two or more years of variable income history but may consider 12-24 months with offsetting positive factors.
Having a year or more of experience as a travel nurse can significantly strengthen your mortgage application. It demonstrates stability and commitment to your profession.
4.2. Income Fluctuation Examples
| Month | Location | Gross Income |
|---|---|---|
| January | California | $6,000 |
| February | California | $6,000 |
| March | California | $6,000 |
| April | Florida | $5,500 |
| May | Florida | $5,500 |
| June | Florida | $5,500 |
| July | Wisconsin | $7,000 |
| August | Wisconsin | $7,000 |
| September | Wisconsin | $7,000 |
5. Per Diem Income: A Critical Consideration
A significant portion of a travel nurse’s income often comes in the form of per diem pay, which is intended to cover meals, housing, and travel expenses while working away from their tax home. However, this non-taxable income can complicate the mortgage application process.
5.1. Understanding Per Diem Income
- Definition: Per diem payments are reimbursements for expenses incurred while working away from your tax home and are not considered income by the IRS.
- Impact on Mortgage Applications: Lenders may view per diem payments differently, with some not considering them as qualifying income because they don’t appear on tax returns.
The structure of taxable and non-taxable pay can make a travel nurse’s income seem lower to a lender than it actually is. This discrepancy underscores the importance of understanding your compensation and how it will be viewed by lenders. Income-partners.net can help you understand these nuances and find lenders who are familiar with travel nurse compensation structures.
5.2. Navigating Per Diem Income with FHA Loans
Does FHA allow per diem income to be used for mortgage qualification? Yes, the FHA does allow per diem income to count towards mortgages for travel nurses, under certain conditions. To include per diem income, you typically need to demonstrate a history of receiving this type of income and the likelihood of its continuance. The FHA often has more flexible income requirements and lower down payment options, making these loans an excellent fit for travel nurses.
5.3. Strategies for Optimizing Per Diem Income
- Maximize Taxable Income: If you plan to buy a home, consider taking as much of your pay as possible in taxable income rather than per diem, as this will provide a clearer picture of your income to lenders.
- Document Everything: Keep all contracts, pay stubs, and paperwork that document your pay structure.
- Housing Stipends: Fannie Mae allows housing reimbursements to be used as qualifying income if they have been received for the most recent 12 months and are likely to continue for three years.
6. Expert Advice: Mortgage Approval Tips
To gain further insights, The Mortgage Reports consulted Angelina Gibson, a former travel nurse recruiter and current content director for Nurse.org. Her advice is invaluable for nurses looking to buy a home in the near future.
6.1. Key Tips for Travel Nurses
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Save All Contracts: Keep physical and digital copies of all contracts between yourself and your travel nursing agencies.
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Avoid High Non-Taxed Stipends: If you plan to buy a home soon, avoid assignments with high non-taxed stipends and low taxable pay.
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Understand IRS Tax Guidelines: Familiarize yourself with IRS publication 463 and understand the tax implications of travel nursing.
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Maintain a Tax Home: If you are receiving non-taxed stipends, ensure you meet the requirements to maintain a tax home.
6.2. IRS Requirements for a Tax Home
| Requirement | Description |
|---|---|
| Regular Employment in Tax Home Area | Maintain regular employment within the area of your tax home. |
| Permanent Address | Maintain a physical address in your tax home area, not a P.O. box. |
| Return to Tax Home | Return to your tax home area about every 12 months to work for at least 30 days. |
7. Exploring Specialty Mortgage Loans
Many nurses wonder if there are specialized home loan programs similar to those available for doctors. While there aren’t specific “nurse loans,” several programs offer assistance to healthcare professionals.
7.1. Nurse Next Door
The Nurse Next Door program offers housing grants of up to $8,000 to all healthcare employees, including nurses, medical staff, and doctors. It also provides down payment assistance of up to $10,681 and reduced closing costs.
7.2. Homes for Heroes
Homes for Heroes is a nationwide program that aims to make home buying more affordable for first responders, teachers, military personnel, and healthcare professionals. According to their website, most heroes save at least $3,000 when they buy or sell a home with them.
7.3. Down Payment Assistance Programs
Down payment assistance programs offer grants and low-interest second mortgages to help healthcare professionals and other first-time home buyers afford a house. These programs are managed at the city, state, or county level.
8. Standard Loan Types for Travel Nurses
In addition to specialty programs, standard loan types are also worth considering. Contrary to popular belief, a 20% down payment is not always required. Several loan types offer affordable financing with lower interest rates for first-time home buyers, including travel nurses.
8.1. Conventional Loans
Conventional mortgages, also known as conforming loans, are the most common type of home purchase loan. 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 can still be advantageous.
8.2. FHA Loans
Backed by the Federal Housing Administration, FHA loans require just 3.5% down and are very flexible in terms of employment gaps, changes in work history, and credit score. These are ideal for first-time home buyers who don’t fit the conventional loan “box.”
8.3. VA Loans
For nurses with military service, VA loans may be the best option. They require zero down and are lenient about credit scores and income types. Eligibility typically requires two years of active service or six years in the Reserves.
8.4. USDA Loans
Guaranteed by the United States Department of Agriculture, USDA loans require no down payment and no ongoing mortgage insurance. However, they come with income limits, and you must purchase a house within an eligible rural area.
9. Managing Your Home While on Assignment
One common concern among travel nurses is managing their home while they are away on assignment. Why pay for a home when you’re not there? Several strategies can help you offset these costs.
9.1. Strategies for Managing Your Home
- Short-Term Rentals: Use your home as a short-term rental through platforms like Airbnb to generate income while you are away.
- Long-Term Renters: Find a roommate or long-term renter who can look after the house and provide passive income.
Most mortgage rules require you to move into the home within 60 days of buying it. If you plan to set up short-term rentals, consider hiring a property management company to handle bookings and other details.
9.2. Finding Good Renters
One effective strategy is to advertise your rental in travel nursing forums or Facebook groups. This allows you to rent to fellow travel nurses who will be in your area, creating instant trust and accountability.
10. FAQ: Mortgages for Travel Nurses
To further clarify the process, here are some frequently asked questions about mortgages for travel nurses:
10.1. Common Questions
| Question | Answer |
|---|---|
| Can you get approved for a mortgage as a travel nurse? | Absolutely! Lenders often understand the unique nature of a travel nurse’s income and employment structure. |
| How do you get a mortgage as a travel nurse? | Start by gathering documentation that reflects your income stability and financial health, including tax returns, employment contracts, and pay stubs. |
| What are the requirements for getting a mortgage as a travel nurse? | Key requirements include a stable income history, a good credit score, and sufficient savings for a down payment. |
| Does FHA allow per diem income to count? | Yes, the FHA does allow per diem income to count towards mortgages for travel nurses, under certain conditions, demonstrating a history of receiving this income and the likelihood of its continuance. |
| What are Fannie Mae guidelines for travel nurses? | Fannie Mae’s guidelines accommodate the unique financial situations of travel nurses, considering variable income streams and employment gaps. |
11. Partnering for Success
Are you ready to explore the best mortgage options for travel nurses? Securing mortgage pre-approval is an empowering first step. It clarifies your budget and strengthens your position as a buyer. At income-partners.net, we provide the resources and partnerships you need to succeed in your home-buying journey.
Click here to explore your options and take the first confident step towards realizing your dream of homeownership. Even if the outcome isn’t immediate approval, you’ll gain valuable insights on the path to owning your home. Let income-partners.net help you find the right partners and strategies to achieve your financial goals. Address: 1 University Station, Austin, TX 78712, United States. Phone: +1 (512) 471-3434. Website: income-partners.net.
