Will the Government Shutdown Affect My Loan?
On Tuesday, October 1st, 2013, the Government Shutdown began. Many areas of our economy have been affected including the housing market.
What do you do if you are one of the many potential homeowners or sellers currently in the middle of a sale? How is this going to affect your loan or whether you can sell your home? I'd like to say that it won't affect you at all. But sadly enough, most everyone will feel the impact of this shutdown in one way or another if it continues to go on for a long period of time.
Here are some general guidelines for each type of loan program and how you will be affected as a homebuyer during the shutdown.
All loans will be processed as usual but cannot close until Tax Transcripts are received. During the shutdown, the IRS is closed and any requests for tax transcripts will not be processed. Some closings may need to be extended until these are able to be received and approved through underwriting.
USDA offices are closed and will not be issuing the Conditional Commitment needed for final approval of these loans. This could cause many delays even after the shutdown ends. USDA will be very backlogged upon returning to work and the turn-around for these Commitments will probably be very long. Many closings will most likely be affected by this and will need to be extended.
Most mortgage companies will not be able to close on these loans without tax transcripts from the IRS. Some companies, like us at Waterstone Mortgage Corp., sell directly to Fannie Mae and Freddie Mac. Because of this, these companies will still be able to close Conventional loans without the tax transcripts in the file. This only applies to borrowers who have been W-2'd for the past 2 years. Any borrower with self-employment income in the past 2 years would still require a tax transcript before closing. Check with your mortgage company to see if they have the ability to sell directly to FNMA or FHLMC.
As you can see, most home purchase transactions are going to be impacted by the recent Government Shutdown. As a seller, make sure you know what type of financing your buyer is approved for so you can understand how your sale will be affected and plan accordingly.
As a buyer, you may also be monetarily affected by this. If you have already locked into an interest rate and your closing date needs to be extended, you may need to extend your lock. Most likely, you will be responsible for the cost of the lock extension because the reason for the extension is not due to negligence by your mortgage company, but rather an overall market condition.
If you are a new buyer beginning to look for a home or a seller just putting your house on the market, keep well informed of the shutdown and how this affects you. But, don't be discouraged. In the meantime, all new transactions should be submitted and processed as usual by your mortgage company so that when the Government is back up and running, you will be ready to proceed as quickly as possible.
Hopefully, this Shutdown will be short-lived and we can all breathe a sigh of relief. But, make sure you are prepared to wait just in case. It's always better to plan for the worst, but hope for the best.