What does the government shutdown mean for my home loan?
I’m not one to get into politics, but I’m against anything that significantly affects my business or lifestyle, of course.
If you are SELLing your house this also impacts you – read below to find out more.
As we all know life goes on, regardless of what the Federal government decides to do or not do. Of course I’m for anything that makes my life easier, and pretty much against things that make it harder. At first I didn’t think this government shutdown would impact me much, but then as I began to learn more about getting a loan, I realized I may get a few more grey hairs because of it. I’ve talked with a bunch of my lender friends, and asked a TON of questions about the whole thing. Here’s what I’ve learned.
FHA Loans and the Government Shutdown
If you are applying for a FHA Loan, you may run into some problems because of the government shutdown.
A FHA Loan is put out by the Federal Housing Administration and is super helpful for first time homebuyers because you only need to put down 3.5%. But there is also a cap of approximately $271,000 (based on what county you are in in Texas). There are lots of other great benefits to an FHA loan, but I’m a real estate agent, not a lender, so call your bank guy if you have any questions. I can also recommend someone, of course.
If you are thinking about getting an FHA loan, this is how it can be affected by the government shutdown.
When you begin to apply for an FHA loan there are a few things that can slow you down right due to the shutdown.
You will need to be assigned a FHA case number. This isn’t done by the bank, but someone at the HUD office which is now partially shut down. It has been determined by some government officials that a complete closure of the Housing and Urban Development office would impact the country’s economy too much, so they are keeping parts open, but with a limited staff. their exact words were: “in order to support the health and stability of the U.S. mortgage market”. Overall this government office works pretty quickly, but now, expect some delays for single family homes.
If you are going to be buying a condo under FHA, it is going to be very difficult right now, as they are not going to be able to underwrite them. This means that the department that actually finds the money is closed. That’s a bad thing.
When you apply for a loan, one step is to verify your most recent Tax Returns. This is called a 4506T Transcripts (certified copies of your most recent IRS Tax forms), and this part of the IRS is currently closed due to the shutdown. I have no idea how this will impact loans right now.
If you get social security benefits, and trying to buy a house, you are in for some setbacks, too. The part of the office that grants clearances is closed because of the government shutdown.
The biggest deal is that you banks need to verify your IRS Returns, and check your Social Security number. If they can’t do this, you can’t close, and get your funding.
Just so you know, this is all only for FHA Loans. If you aren’t getting an FHA loan, you should be OK, just keep in mind that your loan officer may also be working with some clients who do have FHA, and this could slow them down a bit, which may affect you a little.
What if I’m getting a USDA Loan?
I’m told USDA loans are completely closed right now due to the government shutdown. That’s all I know at this point. If you have started the process I don’t know if it will continue. If you are looking to get one, I’m not sure that’s possible right now.
VA Loans and the government shutdown
The VA is still processing home loans, but has a reduced staff, so expect them to take longer.
I live in a Flood Plain, will the government shutdown affect me?
Yes, the FEMA office that processes paperwork will have a reduced staff, and so it may be harder to get flood insurance due to paperwork delays.
How the government shutdown affects my home purchase.
Expect a longer escrow period. Normally we try to close houses in 30 days, but right now I’m writing 45 days or longer into my contracts based on some input from my friends in the lending industry. That’s an extra 2 weeks before you can get into your new home. Not a huge impact, but definitely worth mentioning.
Of course, the longer this goes on, the worse it will be. If this lasts 5-10 days (from Oct 1, 2013), the industry will probably see minimal delays. Of course if this goes on for weeks, I’m not sure what will happen.
Also be aware that what I’ve said really doesn’t affect interest rates. But they could go up based on other factors like if the government shutdown is still in place when we reach the debt ceiling (but that is another blog post I’ll write someday). Boring!
Also this won’t affect the appraisal process.
Keep in mind this also affects sellers! If you are selling your home, talk with me about which offer might be best for you at this point.
If you are buying or selling a house, I encourage you to write to your Senator or Congressperson, and ask them to resolve this.