Last Updated on September 19, 2024 by Luke Feldbrugge
Nurses have job security, flexible hours, help people, and the career offers many avenues for satisfaction and fulfillment. However, when it comes to getting a mortgage for nurses, the profession has a few drawbacks. It becomes challenging to account for a full-time schedule when a lot of the hours nurses work are extra shifts. It can be even more challenging for traveling nurses to get a home loan because of employment gaps. But, the conventional home loan for nurses is an available option that you can use to buy a home.
What Are Conventional Loans
Conventional loans are the most popular type of home mortgage loan in the U.S., with over half of all home loans being conventional. Conventional home loans for nurses are available through mortgage companies, banks, and credit unions. Unlike government-backed loans, like FHA, USDA, and VA loans, conventional home loans have lower down payment terms, no upfront funding fees, and have more favorable mortgage insurance terms.
Advantages of Conventional Loans
- You can use a conventional loan to purchase a second home or a rental property. There is no restriction on the use of the house you buy.
- They have fixed interest rates, meaning that the interest rate does not change throughout the loan’s life.
- They have a higher loan limit compared to government-backed loans.
- Conventional loans have more flexible term lengths and down payment amounts.
- Requires as little as 3% of the purchase price for down payments.
- There are no up front funding fees.
Disadvantages of Conventional Loans
- Higher credit scores are required to secure a conventional loan. Typically, credit scores of 620 are needed, versus as low as 500 for a FHA loan.
- You will need a higher down payment than 3%, IF you wish to avoid Private Mortgage Insurance (PMI).
- There are stricter guidelines to qualify for a conventional home loan because these loans are not backed by the government. It is up to each lender to decide if they are willing to finance you the money.
How Is a Conventional Loan Different From a Government-Backed Loan?
Conventional loans refer to loans that are not government-backed. They are offered by private lenders such as banks and mortgage companies. Their terms are different from government-backed loans such as FHA and VA loans. Conventional Loans require higher credit scores than government-backed ones, typically around 620. Government Loans have limited closing costs while conventional home loans for nurses do not. When you get a government-backed loan, the house you buy must be your primary residence, while conventional loans allow you to buy a second home, cabin, or investment property.
Conventional Loan Interest Rates
Interest rates on conventional home loans are slightly higher than government-backed loans for nurses, such as FHA loans. The interest on home loans is determined by how much it costs the bank to borrow you the funds, and your financial profile, or how likely you are willing and able to pay the loan back. The more it costs the bank to borrow, the higher your interest rate is going to be. Remember that higher interest rates make your loan more expensive over the life of the loan. Currently, however, interest rates are at or near historic lows, which can be a great time to get a conventional loan.
Getting a conventional loan for nurses while interest rates are low means a few things. For one, you will most likely not need to refinance your mortgage any time soon, which will save you money on refinancing closing costs. You might also be able to afford a conventional loan in a shorter term interval, for example, 20 years instead of 30 years. By reducing the number of years on your mortgage, you will pay less in interest over time. However, keep in mind that monthly payments almost always go up in total dollars when the amount of years goes down, even with a lower interest rate.
Loan Qualification
To qualify for a conventional home loan for nurses, you will typically need to have a credit score of 620 at the lowest, but some lenders have a higher minimum. Make sure to talk to your lender and ask what their requirement is before you get too far into the process. Your lender will also ask about your debt to income ratio, which should be around 36%. This means that your debts do not make up more than 36% of your total income. You will also need to provide proof that you have at least 3% of the down payment, although having 20% or more can help you avoid Private Mortgage Insurance (PMI).
A lender needs to verify whether you can afford the down payment and monthly payments for the loan you need. A good rule of thumb is that your mortgage payments should not exceed 28% of your monthly income. A conventional loan has a variety of other costs that you must pay upfront when closing on your home. These include origination fees, broker fees, underwriting fees, and closing costs. Lenders must verify that you can afford these costs. Here are some of the items you must give your lender to be considered for a loan:
Proof of Income
The mortgage company will not give you a loan unless you can prove that you have a regular stable income. Most lenders will require that you provide thirty days of pay stubs showing year-to-date income, two years of federal tax returns, sixty days statement of assets (things like investment accounts). You will also need to provide W-2 forms from two preceding years.
Assets
As mentioned above, the lender needs to know that you can afford to make the mortgage payments and the down payment. They will need to see bank statements and investment account statements to prove that you have money for the down payment. Sometimes, people will have a family member or friend gift them the money for a down payment on a home. In order for that to happen, there must be documentation that this money is in fact a gift. Before accepting the gift, talk to your lender so they are aware of the gift and can direct you on how to conduct the transaction properly. Also, make sure to get the transaction letters notarized.
Employment Verification
Lenders only give money to people with a stable work history. Although you must provide pay stubs, the lender may call your employer to verify your employment status and salary. In case you changed employers recently, they may also contact your previous employer.
We understand that as nurses and healthcare professionals, this can be more difficult than someone with a typical office job. Homes for Heroes mortgage specialists understand the unique employment challenges that nurses, CNA’s, RN’s, and other healthcare professionals face and will work with you to make sure you have what you need to submit your application for a conventional loan. Just sign up today to get connected with one of our affiliates in your community and get you on your way to a loan approval.
Other Documents
The lender will also need personal identification articles like your social security number, a copy of your driver’s license or state ID, and your signature so that they can pull your credit report.
Still not sure if you qualify for a conventional home loan? Sign up now to talk to a Homes for Heroes mortgage specialist. Our mortgage specialists are not only skilled in working with conventional home loans, they’re also skilled at working with the heroes in their community. Homes for Heroes mortgage specialists can save you hundreds of dollars, while our real estate agents can save you thousands. For every $100,000 in home price, our real estate specialists will send you a check for .7% after closing. Talk to a Homes for Heroes mortgage or real estate specialist to start your homebuying journey!
