How much this government shut down impacts mortgage loans depends on several factors, including what stage your mortgage is in processing, what type of mortgage it is and who the investor is. It’s possible that it may not impact your transaction at all. The more time our government is shut down, it may become more difficult or require more time to process a mortgage loan. The shutdown in 1995 lasted for a very long 21 days – let’s hope our representatives can get this resolved soon!
Which government mortgage programs are impacted? USDA has ceased all but essential functions. Please check with your loan officer immediately if you have a USDA loan to get an update. HUD/FHA and VA will continue to operate on a limited staff.
If you are considering buying a home using a USDA loan, you may want to consider “plan b” which could be an FHA loan possible paired with down payment assistance like Home Advantage (available in rural and non-rural areas).
Why does the government shutdown impact mortgage loans? Lenders and banks have underwriting overlays that require IRS tax transcripts (in addition to your W2s or tax returns) to be provided. With the shutdown, obtaining transcripts from the IRS is difficult (if even possible). Banks and lenders also have underwriting overlays that require verification of a borrowers social security number. Some lenders and banks are accepting loans with the signed Form 4506 and documentation proving ownership of the borrowers social security numbers. Some banks and lenders are not.
Tax transcripts and social security verifications are typically not ordered until there is a “bona fide” transaction. Sometimes with a full preapproval or when a loan commitment letter is being offered for a self-employed borrower, it’s possible that the IRS tax transcript may have been obtained.
If your loan is currently in process, check with your mortgage originator to make sure that they have your tax transcripts and social security number verification (if needed). If they do not have these items, find out what your options are with closing your transaction. It’s possible the closing may need to be delayed or that you may need to come up with a “plan b”.
As a correspondent lender, we work with several investors and banks. Currently we are reviewing transactions on a case by case basis if we are near closing and do not yet have the tax transcripts. Self-employed borrowers may find it more difficult to close a mortgage without a tax transcript during the shutdown.
The government shutdown in 1995 lasted for a very long 21 days – let’s hope our representatives can get this resolved soon!
If I can help you with your mortgage on your home located anywhere in Washington state, please contact me!