Government mortgage loans
Up until about a week ago, I was betting my family and friends that Congress would pass some sort of budget bill before the shutdown deadline. It’s a good thing they weren’t real bets.
When I woke up Tuesday morning and heard the ill-fated news, I was almost expecting rampant pillaging and burning from all of the shutdown hype. While this thankfully wasn’t the case, many people are suffering from the congressional impasse and many more will face serious issues if no deal is reached soon.
Business (Basically) as Usual
One of the biggest fears was whether or not government-insured loans like the FHA and VA could still be written. These loans are still available, but there might be some delays as many government offices are operating on a skeleton crew.
If you’ve been thinking about buying or refinancing a home, you don’t need to be put off by the shenanigans in Washington, but be aware that there are some changes that have been made in adjusting to the shutdown.
Bill Banfield, a director of Capital Markets at Quicken Loans, further explains this situation by saying,
“Consumers are little affected as lenders are reviewing their risk management policies and determining how they can best help their clients in this window where certain processes cannot be performed.
We are still doing loans and have not shut anything down, but we have modified some documentation requirements. The goal is to minimize any impact to the client and continue to close loans as quickly as possible.”
One of the requirement changes may be that you’ll have to show your Social Security card to get a loan because some of the government verification processes have stopped.
The Big Changes
Mortgage lenders can’t get tax return verifications (TRVs) from the IRS to confirm clients’ W-2s and tax returns. This can especially affect self-employed clients or those applying for jumbo loans because these situations usually include more complex tax returns.
Also, if you’re buying a home in a FEMA-designated flood zone, the process will be delayed because FEMA is closed; you won’t be able to get federal flood insurance.
The bottom line is that, while there are some definitely negative impacts of the partial government shutdown, the mortgage market isn’t heavily impacted – as long, of course, as Congress can figure out how to come to a resolution.
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I agree with Michael Cheng. If you have a great credit score, stable, verifiable income, verifiable cash on hand or assets, you are a dream client. By comparison shopping, you will be able to obtain a Loan Estimate from at least three different types of lenders: Talk with the mortgage department of where you currently bank. You already have a banking relationship with them. This is a good place to start. Next, apply with a local, licensed non-bank mortgage lender. Somebody located in the town in which you live. Last, apply with a local mortgage broker.