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The Shutdown’s Housing Market Woes

It’s a great time to buy a home, and you’re ready. You’ve saved up a suitable down payment, found a home, and settled on a lender. As an added bonus, interest rates are at their lowest point in the last nine months – despite the Federal Reserve’s interest rate hikes.

There’s only one problem. The government shutdown has created obstacles to your mortgage – maybe in ways you hadn’t considered.

The shutdown effect is obvious if you’re a government worker suddenly trying to buy a home with IOU’s – but, otherwise, why would your mortgage application be affected? It may depend on the type of loan you’re seeking.

USDA loans, popular in rural areas, are backed by the U.S. Department of Agriculture. With the USDA shut down (at least as of this writing), no new applications are being accepted and scheduled loan closings have been put on hold. Homebuyers caught in the middle are being forced to ask lenders for extensions or switch to FHA or VA loans – if they qualify. Some are stuck without viable options, watching potential home purchases crumble.

Other loans may require verifying paperwork from the IRS – for example, verification of income – before loan processing can proceed. The Washington Post reports that the mortgage industry successfully pressed the Trump administration to call back IRS workers processing income verification forms and restore their pay, removing this roadblock. Similarly, FEMA renewed the sale of flood insurance policies that are crucial to home sales in flood-prone areas.

Other case-by-case roadblocks remain and affected interest groups will be lobbying for relief. Stay in touch with your lender and monitor the news, as options could change any day.

How To Keep the Home You Already Have

Government workers who already own homes have a more fundamental cash flow problem. Government contract workers are in even worse positions, because they may not receive back pay to make up the difference.

Few workers can miss multiple paychecks and still…