How Do You Calculate Income for a Travel Nurse?
Travel nurses play a vital role in the healthcare industry by taking on temporary assignments through staffing agencies. These assignments can be local, national, or even international. Unlike traditional nurses, their income can be variable and depends on the contracts they take.
For mortgage companies, determining the income of travel nurses can be challenging due to their unique employment circumstances. However, with the right framework and guidelines, you can accurately qualify their income to issue a loan approval.
Key Considerations
Travel nurses may fall into two categories: self-employed or employed. The method for calculating their income varies depending on their employment status:
Self-Employed Travel Nurses
Self-employed travel nurses typically report their income and expenses on a Schedule C tax form. In this case, you can use standard guidelines for calculating income for sole proprietors. The requirements for qualifying Schedule C income are well-documented, making this process relatively straightforward.
Employed Travel Nurses
For travel nurses employed by staffing agencies or healthcare entities, guidelines do not explicitly outline how to calculate their income. However, by applying general principles for variable income, you can qualify these borrowers effectively.
How to Qualify Travel Nurse Income for Mortgage
To accurately qualify employed travel nurse income, follow the four requirements of all mortgage income:
Employment Must Continue for 36 Months
This doesn’t mean the borrower must stay in the same job or contract but should remain in the same line of employment. A travel nurse with a two-year history of contracts demonstrates a pattern of seeking and securing new assignments as previous ones end. This history supports the assumption that their income is likely to continue.
Income Must Be Stable
Stability is key when calculating income for travel nurses. Due to their variable employment, you need to:
- Collect ending pay stubs from each employer for the current year.
- Gather W-2 forms from the last two years to calculate total income.
- Preferably, obtain Verification of Employment (VOE) forms instead of pay stubs. VOEs often provide a clearer breakdown of income and can result in higher qualifying figures.
When analyzing income:
- Use base pay, shift premiums, and overtime that can be averaged.
- Be cautious on adding per diem payments (reimbursements for travel and living expenses) and one-time bonuses, as they are not consistent from contract to contract
Income Must Have Proper History
Typically, a borrower should have at least two years of employment history as a travel nurse. But what if the borrower has 10 years as a nurse and just changed to travel nursing does that experience in nursing count? Because travel nurses pay (not job responsibilities) are very different I would not recommend trying to qualify any borrower without a minimum of 12 months experience that is outlined in the guidelines. This ensures that the borrower has adjusted to the unique demands and pay structure of travel nursing.
Income Must Be Documented
Documentation is critical. Collect:
- All year-to-date pay stubs from each employer up to the time of application
- All W-2s from the past two years.
- Preferably, obtain VOE or Verification of Income (VOI) instead of paystubs and W-2’s
Variable income guidelines
Use the guidelines for determining variable income and use the required trending guidelines to determine the final qualifying income. What the borrower currently makes per hour is not as relevant to what the qualifying income is versus what the borrower has been averaging per month.
Since the borrower will be assigned different jobs at different pay rates, it is much more accurate to get an average income worked up than use the hourly rate for base pay. This also applies to the overtime, shift differential, overtime, and per diem income if you use them.
Summary
Although there are no specific agency guidelines for travel nurse income, following these steps ensures alignment with general rules for qualifying variable income. By carefully calculating and documenting income, you can confidently qualify travel nurses for a mortgage.
Be sure to clearly explain your calculations on the 1008 to streamline the underwriting process and minimize delays.
Guideline References
- Fannie Mae: B3-3.1-01, General Income Information
- Freddie Mac: 5301.1, General Requirements for All Stable Monthly Income
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7 Responses
Hi How do I get access to your training videos
I have underwriting experience but really prefer to update my skills
each company has certain rules
I may be missing
I have a travel nurse who on her contract it states what she is paid per day for food and lodging and travel. As part of her pay package. When you look at paystubs they are taxing her on the reimbursement income she is making with that said my underwriter is saying we can only use her base pay is that correct?
Hi Dawn
Thanks for the question, if the pay stub has “reimbursement” for lodging and food and travel that is not part of their base pay. If the pay stub shows “pay” for those items, that is a different story. The difference is the reimbursement you submit receipts to the employer to pay you back for the money you spent. If the items are marked as “pay” they are taxes and part of your pay plan. I know this seems like a subtle difference, but reimbursements don’t qualify as pay.
How would you handle income verification if the nurse has worked for multiple facilities over the last 2 years, and has a mix of W2’s and 1099’s?
Hi Landon
That radds to the complexity of travel nursing. Getting 1099 means you are “self employed” by the guidelines (unless you use the FHLMC 1099 rules) so you have to have a two year history of doing SE income. But if your just using 1099 to link together the “history” of earning nursing income it makes sense. What becomes hard is knowing stop and start dates for SE borrowers to make sure the gaps between jobs and 1099 is not broken. If the jobs and 1099 (SE Income) and If you can clearly document start and stops AND the bororwer is a W2 for HOPEFULLY 6 months or more NOW then you can add all the incomes up to average.
Sorry clear as mud.. but this is the challenge…. I would suggest you create a document that shows start + stops on each and the average income earned so your investor can better see your thought process.
I have a travel nurse that receives a housing stipend an per diem meals. The underwriter is not including them in her income. Should that income not be used even though she receives it ever week?
Hi Monique
That question is a tricky one! The reason why is per diem and housing stipends are not listed in the guidelines directly and what to do with them. So we have to think about what they are and do they meet the 3 requirements of all income. I think they “could be used” but… here is the rule they tend to violate which makes the income unqualified. Most travel nurses keep a contract for 4-6 months..so if they move to a different area they may not get per diem, or get less for meals since those are really dependent on location. Now if your borrower has two years of travel nursing AND works in the same area, AND gets the same per diems…well that would be the exception.
To help your UW see your point and maybe use the income I would reocmmend you document the 2 year history of stable even per diem and stable even stipends.
Thanks