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The Government Has Shut Down: Now What?

The Government Has Shut Down: Now What?Failure to pass a budget in Congress caused a government shutdown this morning at 12:01AM, causing thousands of federal workers to be put on furlough. This is having an impact on home sales since the loan process will be affected.

How will this affect home buyers and sellers?

Here are some common questions about the shutdown:

Common Questions

1.       Can you get a USDA loan?

A:  No. Unless your mortgage company received USDA approval prior to October 1.   As of today, all USDA mortgage lending operations are closed. Loans with existing rural guarantees will be funded and purchased.

2.       Can you get an FHA mortgage?

A:  Yes.  FHA says it “will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market.” A longer term shutdown would likely result in major delays.

3.       Can you get a VA mortgage?

A:  Yes. The Department of Veterans Affairs says loans are funded via user fees and should continue. However, during the last shutdown, “loan Guaranty certificates of eligibility and certificates of reasonable value were delayed.”

4.       Can my mortgage company get my 4506 tax transcripts from the IRS?

A:  No. This affects all mortgages and is the biggest issue when it comes to the shutdown affecting home sales. The IRS will not accept new orders or return any in process until operations have resumed. As a part of the loan guidelines for all mortgages backed by Fannie Mae, Freddie Mac, or the FHA, mortgage companies use 4506 request forms to verify income from the IRS. With the shutdown this part of the loan process will be delayed.

5.      Can you get a proof of income letter from the Social Security Administration?

A:  No.   The Social Security Administration will not process any requests until operations resume. The good news is proof of income is not needed for every loan.

Home buyers and sellers should speak with their real estate agents, mortgage brokers, and attorneys about setting realistic dates on their mortgage contingency extensions.

During this shutdown all parties involved in the home sale transaction must remain patient.  Consideration will be essential for dealing with this in order to make sure the sale eventually goes through.