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The Government Shutdown & Your Real Estate Transaction

October 12, 2013

A Beautiful HouseYou’re interested in buying a home or refinancing, but maybe you’re worried about how the government shutdown will affect the process. Here’s some insight…

1. Processing Times

Many lenders rely on government agencies, particularly the Internal Revenue Service, for some of the paperwork that goes along with processing a home loan. For example, the IRS usually verifies borrowers’ incomes. Almost two weeks into the government shutdown, lenders have been able to work around many of these types of delays with certain functions which are still available online with some limitations; however, backlogs will increase and processing timelines may take longer over time. They have also been accepting different forms of income verification, including pay stubs and tax returns, but this could get risky without the extra layer of protection.

2. Federally Funded, Federally Guaranteed

Federally funded loans have no doubt been affected by the government shutdown, but even loans that aren’t federally funded can see a halt in the process. As an example, FHA and VA loans, which are not federally funded but are federally guaranteed, will mostly see continuous activity, but some smaller lenders may not be willing to fund these loans without the federal guarantee that is null during the government shutdown. Also, lenders who can’t subsequently sell their loans to federally-backed mortgage giants like Fannie Mae and Freddie Mac will likely start to run low on funds and be less inclined to use their own capital to fund home loans.

3. Interest Rates

Interest rates may be more in flux if the shutdown persists as the fear of a debt default grows.

For more information on the how government funding will affect the housing market and the real estate transaction process, read the following articles (sources):

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