The Government Shutdown might be hurting some home hunters. Palm State Mortgage sadly reports that some buyers who are using FHA and VA loans might be encountering some closing problems and delays due to the current partial government shutdown.
Home Buyers: Hitting Some Government Shutdown “Snags”
The government shutdown might be causing some problems with real estate and housing deals. Experts have stated, “The second-longest government shutdown in history is hindering hopeful homeowners from getting the keys to their dream house.”
If you are borrowing with FHA or VA loans, it’s true you might hit some delays due to the government shutdown. Likewise, some newscasters have reported some home buyers have experienced similar slow-downs in getting a loan through USDA.
Greta Slagill with GMH Mortgage Services LLC. stated, “I have several clients that are right now on hold because USDA is not issuing any commitments.” You might already know that the government shutdown has frozen USDA. This is a much favored federal loan choice for low-income home buyers.
How the Shutdown Affects Mortgage Shoppers
In some cases, the government shutdown has caused a vicious circle. You see, many sellers have to delay buying another home because the must sell their “old” home first.
When sellers cannot sell homes, buyers cannot buy homes.
Government Shutdown Basic Facts
1. The shutdown began December 22, and it is the longest shutdown on record.
2. Many non-essential government workers have been placed on furlough.
3. We call it a partial shutdown because much of the government was previously funded.
4. However, we know non-essential government workers have been on a forced furlough. Others continue to work although their paychecks have stopped.
Government Shutdown Affecting Some FHA Loans
FHA mortgages are generated in the private sector but they are backed up by the government. It can be disconcerting to visit the FHA website during this government shutdown. You see, HUD operates the FHA, and HUD is closed due to the shutdown.
At the HUD website, a bright red message with this announcement. “Due to the lapse in Congressional Appropriations for Fiscal Year 2019, the U.S. Department of Housing and Urban Development (HUD) is closed. HUD websites will not be updated until further notice.”
However, they really have an excellent FAQs page on the situation while they are closed. Check it out if you are considering an FHA loan.
Home Buyers Should Keep Calm and Shop On
There will undoubtedly be many more news reports and background chatter about mortgages, real estate and the shutdown. Here at Palm State Mortgage, we like to quietly look at the facts.
The National Association of Realtors surveyed its members about the shutdown and published these statistics:
- In the survey, 75 percent of the realtors reported there was no impact to their closings.
- However, the realtors did describe that they felt it affected 11 percent of their potential clients.
- The Biggest Impact: 25 percent of them felt some buyers decided not to buy simply because of current, general economic uncertainty. (This group did not include federal employees.)
- 17 percent of those home buyer affected by the shutdown, had or are now experiencing a closing delay because of a USDA loan.
- 13% of the realtors noted delays in closings due to IRS income verification. This is a normal requirement for processing a loan. As noted above, some home buyers (about 9%) are experiencing closing delays in FHA loans.
- Likewise, a few (6%) of the realtors reported home buyers having delays in processing VA loans.
A related report from CBS News explained:
“If you’re getting a Federal Housing Administration or Department of Veterans Affairs loan, it’s likely you can expect delays in the underwriting process. And it’s possible your closing date will be pushed back as well.”
The FEMA Effect on Home Buyers in Florida, Louisiana, and Texas
Another reason you might watch the developments in the government shutdown involves a recent FEMA announcement.
To put it briefly FEMA stated it would refuse to sell new flood insurance policies through private insurers. This is “due to the lapse in appropriations.” (A brief visit to their website shows a red ribbon at the top of the page. It explained their website won’t be actively serviced until the shutdown is over.)
What does this have to do with home buying? Well, FEMA runs the National Flood Insurance Program (NFIP) which floats most about 5 million flood insurance policies. Over half are in Florida, Texas, and Louisiana.
So if you are house hunting in flood-prone areas, be aware that banks do not approve mortgages for potential buyers who do not have flood insurance.
NFIP is not the Only Game in Town
Lynne McChristian, a representative of the Insurance Information Institute, which provides data to home insurers, stated. “Real estate, however, is all about location. And what makes a location attractive in January is a warm climate by the coast.”
Yes, we know this is true of the Florida coast and the spectacular rivers, lakes, and streams of our beautiful state.
Thus, we are happy that McChristian also explained NFIP is not the only way to obtain flood insurance.
He added, “Prospective buyers have options in the private flood insurance market now. And many private insurers offer flood insurance at comparable prices that may also be more comprehensive.”
Home Buyers Biggest Question: How Long will it Take to Get My Loan?
According to a recent report, the average time to close on a mortgage loan was 46 days toward the end of 2018. We have seen that figure remain pretty steady in months gone by.
Now we are seeing some delays, as reported above. However, as of January the second, 2019, the Home Buying Institute reported that “average time to close in 2019 will probably fall within that same range, or perhaps a bit less due to the ongoing digitization of the lending process.” And we add, it could take a bit more time.
Your Mortgage Story is Unique, Shutdown Notwithstanding
You see, here at Palm State Mortgage, we have discovered every home buyer’s story is different. Plus, every loan situation is different.
Keep in mind that the figure of 46 days to attain a closing on a home is an average. It might be lengthened or shortened. That might happen as much because of your financial situation as by the partial government shutdown.
We are here to watch all the economic conditions that might affect you and your home buying dream. As we have said so many times before, you find the house, and we will find the best mortgage to fit your fiscal situation.