Blueprint

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