Everyone is talking about the U.S Government Shutdown and for good reason. Hundreds of thousands of government employees have been furloughed without pay and those considered ‘essential’ are still expected to work. Funding for Women, Infants and Children (WIC) has been stopped leaving 8.9 million already unstable families, in a difficult situation. This is the first government closure in 17 years.
While the real estate market has experienced increased home values, the shutdown has slowed down the approval of thousands of mortgages which could negatively affect the recovery of the real estate market.
Can I Still Get a Home Loan?
A Bloomberg article describes how the various federal loan operations will be impacted:
“The two mortgage finance companies are responsible for the majority of new loans while the FHA and U.S. Department of Veterans Affairs account for about one in four new mortgages. The U.S. Department of Agriculture, which offers low-down payment mortgages to rural borrowers, has canceled loan closings during the shutdown, according to its website.
A short-term disruption of some FHA loans “while certainly detrimental, shouldn’t have much long-term impact on either demand or housing affordability,” Humphries said in a Sept. 30 blog post.
Only 67 of the FHA’s 2,972 workers are working through the shutdown, including 29 employees dealing with loan endorsements and preservation of properties, said Department of Housing and Urban Development spokesman Jerry Brown. FHA is an arm of HUD.
During the shutdown, FHA won’t process “Title 1” manufactured housing and home-improvement loans and reverse mortgages, which allow borrowers age 62 or older to withdraw equity and repay it only when their homes are sold, according to the latest update to HUD’s contingency plan.
“There’s a skeleton crew,” he said in a telephone interview. “We still intend on processing FHA loans.”
However while the Government Shutdown presents an immediate issue for home buyers with the intention to use a government loan program, the bigger issue the real estate market faces is the debt ceiling. If Congress is unable to raise the debt ceiling by October 17th there is a strong chance we will default on debt obligations. If this happens it could cause a sharp increase in mortgage rates. This will not only make homes unaffordable for many families but also discourage people to sell a home they currently own with a low rate. The results will be a decrease in real estate inventory and a reduction in buyers. This is a serious concern for the real estate market.
What Should I Do?
While the Government Shutdown is unnerving it does not mean that people should rush out and buy a home they aren’t confident they want. However if you have a home with a high interest rate and you have been delaying refinancing now is definitely the time.
The financial difficulties that face our country are not much different than those that face an individual or a family. If you are struggling with debt or real estate legal problems, contact Suburban Legal Group today for a FREE 30-minute Consultation and get a FREE copy of the book, “12 Things You Must Know Before Filing For Bankruptcy.” We are here to help, even if you never become a client!
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.