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How government shutdowns affect mortgage lending
Getting and managing home loans can be more difficult, but not impossible.
The government might be shut down, but that doesn’t mean you can hold off on your mortgage repayments. However, you might want to rethink financing a new home through a government program right now. Some programs are completely on hold. And even those that are up and running are experiencing major delays.
How does the government shutdown affect my current mortgage?
If you already have a mortgage through a government program, you’re relatively unaffected by the government shutdown. You still have to make repayments according to your regular schedule.
Variable-rate mortgage holders might be in luck — interest rates have decreased since the shutdown began on December 22, meaning you might not have to pay as much for the time being.
The FHA is still funding most single-family loans during the shutdown. However, it’s not endorsing Title I loans or reverse mortgages.
Even if the FHA is processing your type of loan, expect delays. With fewer hands on deck, the underwriting process is taking longer and your closing date might be pushed back. Delays could last even after the shutdown is over, thanks to a backlog of applications.
Some representatives of the FHA’s customer service team are on furlough, so you may have trouble getting ahold of someone to answer any questions you have about a current or potential application.
The Department of Veterans Affairs (VA) is still processing loans, but some customers are reporting that it’s taking longer than anticipated. Others say it’s business as usual.
Like the FHA, VA support staff is also on furlough. You’ll likely experience a delay in responses to any questions about VA mortgages until the shutdown is over.
Currently, the US Department of Agriculture (USDA) is not processing Direct Loan or Guaranteed Loan applications during the shutdown. It’s also canceled all scheduled Direct Loan closings that were in the works.
Your lender might still be able to close your Guaranteed Loan, but only if the USDA issued the guarantee before the shutdown. Otherwise, you’ll have to wait until the government’s back up and running — and the USDA makes its way through the backlog of requests.
I’m on furlough and am struggling to repay my mortgage. What are my options?
You actually have a few places to turn to for help. Several credit unions and banks have started offering financial assistance for furloughed employees, including 0% interest loans, pay advances and waived overdraft fees on checking accounts.
Some lenders are also allowing furloughed employees to pause repayments until they receive back pay. Reach out to your bank and creditors, and check out our article on financing options for furloughed employees for more details.
How else does the government shutdown affect mortgages?
Aside from making some government-issued mortgages temporarily unavailable, the shutdown has also affected other aspects of the housing market.
You can still get home insurance through the government during the shutdown. While the Federal Emergency Management Agency (FEMA) had announced it’d stop offering and renewing flood insurance on December 26, 2018, it reversed that decision on December 28th.
The FHA is still approving lender insurance, though it might stop if it runs out of funding.
Lower interest rates
If you think you’re planning on taking out a mortgage in the next 60 days, you might want to consider locking in an interest rate now. Mortgage rates have fallen since the shutdown started, and some experts predict they’ll rise after it’s over. Typically, you can lock in a mortgage rate for a loan you plan on signing in 15, 21, 30, 45 or 60 days.
IRS and Social Security delays
The IRS transcription service is currently down, so you won’t be able to get a transcript of your tax returns until after the shutdown. Since most lenders request a transcript when you close a mortgage, your closing date might be pushed back until after the shutdown is over.
The Social Security Administration is also experiencing a backlog of lenders requesting to validate Social Security numbers, so you could have trouble getting approved for any kind of loan. Some lenders are holding off on tax transcript requests and Social Security verification just before your loan is delivered rather than before approval.
Your student and business loans might also be affected
Paying off or applying for federal student loans? Thinking of applying for a Small Business Administration (SBA) loan? These might also be affected. Learn more with our article on what happens to government-issued loans during the shutdown.
When it comes to mortgages, chances are you won’t be affected by the government shutdown unless you’re applying for a new home loan. If that’s you, expect delays across the board to extend beyond the government shutdown. Those who want a mortgage sooner might consider getting a home loan elsewhere. You can get started by checking out our guide to mortgages.
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