Don’t Let the Government Shutdown Derail Your Plans to Buy a House

Even under ordinary circumstances, the homebuying process can be complicated and confusing. The current circumstances are far from ordinary.

The government shut down on October 1, and millions of workers across the country have been furloughed or required to work without pay. Agencies have been forced to close or curtail their services, and others will have to follow suit in the coming days if the government doesn’t reopen.

If you were planning to buy a home soon, you might be wondering if you’ll have to put those plans on hold or give up on your dream of becoming a homeowner. It’s still possible to buy a house now, but you might encounter roadblocks and delays.

How the Government Shutdown Is Affecting Homebuyers

The shutdown is causing bottlenecks in loan processing. Due to staff reductions, agencies that provide government-backed mortgages can’t keep up with large numbers of applications.

Borrowers can apply for loans through the Federal Housing Administration, but applications that must be reviewed by staff won’t be processed until the government reopens. The Department of Veterans Affairs is still approving mortgage applications during the shutdown, but the Department of Agriculture is not issuing new loans.

When the government reopens, it will take time for staffers to work through the backlog. The longer the shutdown stretches on, the more applications will pile up.

Homebuyers who are applying for conventional loans through banks and credit unions can also experience delays due to the shutdown. Lenders require documentation to verify applicants’ income. Borrowers who need to obtain official documents from the Internal Revenue Service or the Social Security Administration might not be able to get them until the shutdown is over.

People who want to buy a house in a flood zone must purchase flood insurance before closing. The National Flood Insurance Program has paused its operations due to the shutdown. While private insurers offer flood insurance, it’s not available in all areas.

How to Get a Mortgage While the Government Is Shut Down

Buying a home during the government shutdown will be challenging, but not necessarily impossible. If you must obtain an official document or flood insurance and you can’t get it due to the shutdown, you’ll have to wait for the government to reopen and possibly delay your closing.

When it comes to getting a mortgage, you’ll have more flexibility. The shutdown has affected conventional lenders less than agencies that offer government-backed loans.

One of the perks of taking out a government-backed mortgage is that you can make a small down payment, and sometimes no down payment at all. Conventional lenders might require larger down payments. If you want to close soon and you can afford to put more money down, you can take out a loan through a bank or credit union.

How to Protect Yourself When You Make an Offer

When buyers bid on a house, it’s common to include one or more contingencies. Those are terms that must be met before the deal can move forward. For example, buyers often include contingencies saying that the transaction will only go through if they get approved for a mortgage.

Given the high level of uncertainty, it would be prudent to include a shutdown contingency in your contract. That will give you additional time to close on the house if things get held up because of the shutdown.

Ask Your Agent for Advice

How the shutdown will affect you will depend on what kind of loan you’re seeking, where you’re planning to buy a house, your financial circumstances, and how far along you are in the homebuying process. Your real estate agent can answer questions about your specific situation and help you figure out what to do.

Information Is Your Most Valuable Resource

During this uncertain time, the best thing you can do is stay informed. While you’re monitoring the news and waiting for the shutdown to end, you can learn more about the homebuying process and explore your options. The First-Time Homebuyer Masterclass will tell you what you need to know about different types of mortgages, down payments, insurance, and more. Enroll today.