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October 9, 2013

Don’t Let Your Loan Get Shut Down, Too

The current government shutdown is certainly having its effect on the real estate industry. The main issue seems to be lenders’ individual policies on verifying borrowers’ tax return information—and how that verification can potentially shut down your loan during a home purchase.

The loan process typically requires buyers to complete a 4506-T tax verification transcript. However, the IRS is closed. And that means lenders are deciding how to handle this requirement.

I consulted with several lenders and mortgage brokers to see how they’re handling this aspect of loan processing. First Republic and mortgage company Primary Residential are both waiving that requirement. Preliminary feedback from RPM Mortgage indicates that the company will fund conforming loans (up to $625,500) without the tax verification, but the jury is out on jumbo loans. Wells is not requiring tax verification immediately, but requesting it by close of escrow.

Bottom line on the shutdown is that if you’re planning to write an offer on a property, double check with your lender on how it plans to handle these tax and social security number verifications. You don’t want to be caught in contract with a tight contingency removal timeframe, only to learn that your lender insists on verifying the info. The key is to work with a lender who will be nimble in the face of this government shutdown, so the real estate industry doesn’t end up shutting down, too.

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