A Government Shutdown Does Not Likely Mean You Are Shut Out of a Mortgage
A frequent question I am hearing recently is how a government shutdown affects mortgage lending. From time to time, the United States government “shuts down” and the impacts vary based on the time of year and the length of the shutdown. In our current shutdown period in January 2019, the only impacted mortgage financing product impacted is the USDA loan.
The United Stated Department of Agriculture (USDA) provides a unique loan product restricted to designated rural areas. There are currently no USDA loans able to be closed. Depending on how long the shutdown extends will dictate how long the delays will be for the USDA to process final approvals once the government opens again. Conversely, at this time, conventional, FHA and VA loans are not impacted and are able to be closed without delays related to the government shutdown.
Who Will Be Impacted
One particular type of borrower will be impacted should the shutdown extend past January…the self-employed borrower needing to file their 2018 tax returns. Self-employed borrowers are required to have filed two years of tax returns for a lender to calculate their qualifying income – by averaging the most recent two years of filed returns and making sure there is not a significant decline in income.
If a self-employed borrower needs for 2018 to count as the second year of filed returns as a self-employer, they will need to wait until the government opens to file their 2018 tax returns. Also, if a self-employed borrower needs to use their 2018 income so it can be averaged with their 2017 filed income instead of the average of the filed returns for 2016 and 2017 to get the desired qualifying income for the borrower, they will need to file the 2018 returns.
There may be additional ramifications related to the mortgage industry should the government shutdown extend for a more prolonged period of time, but those ramifications will be brought to the attention of the lenders by the different agencies (Fannie Mae, Freddie Mac, HUD/FHA, VA and USDA). These notices are distributed to all lenders so if you are thinking of obtaining a mortgage during this time, be sure to find a lender that you feel confident will keep you updated of any changes during your home search.
It is my responsibility and promise to my clients to ensure they are aware of any potential impacts due to a government shutdown. This is why communication is a pillar of what I provide to all my clients.
It would my pleasure to assist you with your mortgage needs. My promise to all my clients is to be honest with you, work hard for you and exceed your expectations. Please know my main function is to be your loan advisor and I look forward to speaking with you.
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