Will the Government Shutdown Affect Your Ability to Secure a Home Mortgage?
Thinking about buying a home or condo and wondering whether the government shutdown will hinder your ability to obtain financing and close on your property?
South Florida has seen a tremendous surge in residential real estate sales in recent months and the momentum has continued through the start of the New Year.
If you are planning on obtaining financing through Fannie Mae or Freddie Mac your closings should proceed normally since neither is funded by the government, although they use federal guarantees. The Department of Veterans Affairs has also kept its home-loan program running during the shutdown and loans are proceeding with no major issues.
If you are applying for a loan through the Federal Housing Administration (FHA) you may experience some delays due to a decrease in staff but this has not caused a significant impact as of yet.
The shutdown has delayed a lender’s ability to obtain a Form 4506-T from the IRS to verify a borrower’s tax returns and annual income, since the IRS is only operating with 12.5 percent of its workforce, or about 10,000 employees. Lenders have adopted alternate methods of verification for the time being such as cancelled checks or bank statements to verify payment to the IRS and the type of tax return the borrower received.
Self-employed home buyers seeking a “jumbo” sized mortgage that can’t be sold to Fannie, Freddie, or FHA are now subject to more conservative underwriting procedures, which may delay closings. However, the shutdown has had the most significant impact on those financing homes with loans through the U.S. Department of Agriculture, which offers zero-down payment mortgages and low interest rates to improve rural areas. The USDA loan program, which has roughly provided over 100,000 home mortgages per year, is now in total shut down. Scheduled loan closings have been put on hold indefinitely and the USDA is not currently accepting new applications. Buyers could be out of the money spent on inspections and appraisals if Sellers do not agree to extend their Contracts until the shutdown is over.
Bottom line, regardless of the type of loan you are obtaining, it is crucial as a Buyer to know the deadline of your loan approval period (Section 8(b) of the FAR BAR “As Is” Residential Contract for Sale and Purchase) and be proactive with your lender so that you don’t let the deadline pass without a fully executed Addendum extending the loan approval period.
Association Title Services, the title company affiliated with Becker, has not seen any significant delays in closings due to the government shut down.
Elana Friedman represents purchasers, sellers, and developers in the acquisition and disposition of residential, commercial real estate and business assets. She also represents banks in the disposition of Real Estate Owned (REO) assets and condominium associations in the disposition of association acquired units. Elana also has a Masters of Law in Real Property Development and a strong background in condominium and planned development law.
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