Update: Looks like the government shutdown has been averted! But in case anything else arises to shut down the government, here’s how your FHA loan can be affected.
Politicians are scrambling to avoid a potential government shutdown, which would affect many aspects of everyday life. The primary effect the shutdown may have on the real estate industry is that FHA loan processing may be substantially slower.
For buyers who are already in contract, there should be nothing to worry about. But if you’re on the verge of making an offer on a property, here’s a heads up on what you may encounter:
Obtaining a case number. The FHA assigns a case number to each ratified contract. All three lender reps with whom I spoke say the shutdown should not result in the limited ability to get a case number. It’s apparently assigned via an automated system; however, if there’s a conflict (i.e., the number assigned is connected to a previous property, and the number hasn’t be released) your purchase may stall.
Underwriting will continue. Once your documents are assembled and it’s time for final loan approval, the lender is the entity that gives the green light—not FHA staff. Good news.
Get your tax transcripts now. Loan approval requires tax transcripts from the IRS. If the IRS is closed, you won’t be able to order your transcript. It’s best to do that before the shutdown.
Identity checks may be halted. Part of the FHA loan process involves what’s called a Credit Alert Interactive Voice Response System (CAIVRS) check. The federal government has a database that lists people who owe it money or have federal liens against them. The FHA runs a check on all parties involved in the transaction, and ensures no one is in the database. If the FHA is down, it won’t be able to complete the check.
Bottom line? Proceed with your purchase, but try to get as much upfront work done as possible before the shutdown. And give yourself plenty of time in your financing contingency so you can work through what hopefully will not be a lengthy government shutdown.