The government shutdown has impacted many across the country, beyond those employed by the government. In many ways, it is highlighting just how many things require government involvement. Homebuyers are among the many impacted. We thought it would be helpful to look at how the government shutdown impacts Massachusetts home closings.
Government Insured Mortgages
FHA, VA, and USDA loans are insured by the US government. Although mortgage lenders issue and close the loans, the mortgage insurance component of the loan involves the government. Currently, loan applications for single family home purchases are still being processed, but at a slower rate given limited government staff. Condo buyers, multi-family buyers and those looking to refinance are out of luck, as those loans are not being processed at the moment. Thus, the shutdown is delaying closings for some buyers and preventing others from being able to purchase a property at all.
Tax Return Verifications
For all types of loans, including government insured ones, verifying prior years’ tax returns is part of the mortgage approval process. With the government shutdown, lenders may have difficulty obtaining this information. This delays mortgage approvals and therefore delays home purchases and mortgage refinances.
The Domino Effect
If you’re lucky enough to not be using a government insured loan and to already have IRS tax transcripts for income verification, that doesn’t necessarily ensure an on-time closing. For instance, if you are selling your existing home to purchase a new one, the buyer of your home may encounter delays. Thus, you may not be able to sell and have funds for your next purchase. A delay with any home buyer can have a domino effect on one or more subsequent closings in the chain.
Additional Thoughts on How the Government Shutdown Impacts Massachusetts Home Closings
As you can see, there are several ways the government shutdown impacts Massachusetts home closings. This is in addition to the obvious difficulty of a government worker being unable to close on a home without proof of current income. Unfortunately, there may be little you can do to bypass some of these issues. Some closings will take place later than planned, some may have no planned date until the government re-opens, and others may simply fall apart in the meantime.
As emotional as it may be, buyers and sellers should remember that these issues are neither the fault of the other party nor the lender. Treating each other with respect and understanding in light of difficult circumstances is the least that we can do to cope with a situation that we have little control over.