Since December 22, the federal government has closed its doors, now marking one of the longest shutdowns in U.S. history. While workers in National Parks and TSA agents struggle to make ends meet in the absence of paychecks, the trickle-down effects of the shutdown begin to affect all of us, including homebuyers. In the mortgage industry, many of the typical loan processes now take much longer—or worse, do not function at all. It all depends on the type of loan, and how prepared you are to deal with the situation.
Here’s the breakdown:
Problems Caused By The Government Shutdown
Many potential homebuyers across the country have been thwarted in their attempt to purchase since the shutdown began. Many government agencies, like the Internal Revenue Service, are either not operating or severely understaffed, which impacts a client’s ability to obtain income verification forms. For USDA loan applicants, the impact is far graver, as the USDA is not issuing any mortgage guarantees until the government shutdown ends, which could lead to homelessness, displacement, and a steep decline in the housing market as an entire bracket of buyers are effectively handicapped.
Not Everyone Is Impacted The Same Way
That said, some loan options are still available, and even some government-backed options like FHA and VA are still operating as usual. Many companies and some banks have also implemented workarounds for the non-availability of tax return transcripts through the Internal Revenue Service or are willing to underwrite certain loans to keep loans moving. In stark contrast, some USDA borrowers could lose everything, including a good-faith deposit, due to the cease in cash flow. From delays, to minor inconveniences, to the very real possibility of homelessness, no one looking to purchase or refinance a home will remain untouched by the shutdown.
How Can You Stay Ahead?
If you’re thinking about buying but holding off because you’re concerned about verifying income or USDA loan approval, there are solutions, and not all loans are impacted equally:
- First, find your tax returns and W-2’s, and have those at-hand when you’re ready to buy. Since the Internal Revenue Service is currently not verifying tax data, you will need the last two years of tax returns and W-2’s ready to go.
- To show proof that you have filed your taxes, make sure that you can provide proof of receiving your refund or paying your bill.
- Identify yourself – Find your social security card and prepared to have a copy available with your mortgage application. If one is not available, have your passport handy as an alternative document.
- If you are buying USDA – be prepared to wait. While banks are underwriting USDA loans, the loans will not close until the government reopens. After the government reopens, there will be a backlog of applications that the USDA will need to endorse. This backlog will take a while to clear, so be patient.
If you’re ready to buy, contact Park Place Finance today. We’re here to walk you through the process, make sure you have all the correct documentation, and help you prepare to finance the home you need.