Housing loan delays
During a shutdown, government services that support housing operate slower. “Even with the government shutdown, it’s still possible to obtain a government-backed loan from agencies like the FHA and VA,” said Joseph Young, managing director at Mercer Advisors, as stated by Yahoo Finance. “But they’re operating with significantly reduced staff, so processing times and closing dates are likely to be interrupted.”
Steps needing manual review or federal verification, like income checks or IRS transcripts, may be delayed, causing some deals to expire. USDA loans, which help low-income and rural buyers, are completely suspended, according to Young. Flood insurance is also affected because the National Flood Insurance Program (NFIP) is closed, which can stop many mortgages from closing. Analysts at HomeAbroad estimate about 3,600 home closings per day, worth $1.6 billion, could be at risk if NFIP stays closed.
Impact on federal workers and local markets
Roughly 670,000 federal workers are furloughed, and 730,000 work without pay, reports the Bipartisan Policy Center. If the shutdown continues, up to 1.3 million active-duty military and 750,000 National Guard/reserve members may work without pay. This income loss is already changing local housing markets. “The psychological toll of the shutdown is already seeping into homebuyer behaviors,” said Alex Blackwood, CEO of mogul.
In the D.C. area, pending home sales are down 6.7% year-over-year, while new listings are up 9.8%, showing some homeowners want to sell due to furlough fears. Homeowners affected by the shutdown should contact their mortgage servicer early. According to the report by Yahoo Finance, “Acting early, before missing any payments, can help homeowners stay in control,” said LaQuanda Sain, Rocket Mortgage. Many lenders offer hardship programs like mortgage forbearance or temporary payment adjustments, which can help during short-term disruptions.
Mortgage rates and refinancing
The shutdown can lower mortgage rates because investors buy U.S. Treasurys, reducing yields. “One of the few silver linings in this shutdown is what it’s doing to mortgage rates. We’ve seen rates dip to near their lowest levels of the year,” said Blackwood. Freddie Mac reported the 30-year fixed-rate mortgage at 6.17% in late October, the lowest in over a year.ALSO READ: U.S. national debt hits $38 trillion, driving mortgage rates higherLower rates don’t always mean refinancing is smart, as many homeowners still have pandemic-era sub-3% loans. Lenders might also tighten rules during financial uncertainty, making refinancing less certain. “While borrowing costs may soften, financial readiness and agility matter more than ever,” said Young. He advises borrowers to organize documents, maintain strong credit, and act fast if good terms appear.
Even active programs are slower because VA and HUD teams have reduced staff, causing longer underwriting and closing times. Buyers should share all updated documents upfront to avoid delays requiring federal verification. Real estate contracts now include “shutdown contingencies” to allow extra time if federal services slow down. After the government reopens, backlogs won’t clear immediately, as thousands of pending files return at once. Rural and coastal areas are especially affected because USDA loans and flood insurance are critical for deals.
Government-heavy regions like Washington D.C., Northern Virginia, and Maryland are seeing demand cool down due to paused paychecks. Rural areas are affected by stopped USDA financing, and coastal regions are hit by flood insurance lapses. Metro areas with diverse economies or many cash buyers may experience less impact. This may cause a split market, where federal-worker-heavy areas see stagnant prices, but other regions remain steady.
How homeowners can protect themselves
Financial flexibility is important. Homeowners should look at their cash flow and main monthly expenses. Plan a budget, separate essential and optional spending, and think about using savings or other money sources. Contact your mortgage lender early, stay organized, and communicate clearly. Those in flood zones should check their insurance and update paperwork to avoid delays.
Buyers using federal loans should expect slower timelines and have a backup plan. “HUD continues to process FHA loans, and the VA is still originating loans as well,” said Sain, but steps like underwriting and verification take longer. Conventional loans from Fannie Mae and Freddie Mac are largely unaffected. Buyers may keep conventional approval ready if government-backed loans delay.
Young advises buyers to stay focused, organize documents, and communicate clearly with sellers and lenders. Blackwood sees opportunity in the chaos, “People tend to feel most confident investing when things are going well. But history shows the best long-term returns are made when conditions feel uncertain”, as stated by Yahoo Finance. Buyers willing to navigate slower processes may find high-quality properties at discounts, while rental demand continues to rise.
FAQs
Q1. How does the government shutdown affect home loan approvals?
The shutdown slows federal services, delaying FHA, VA, USDA loans, and flood insurance, which can push back closings.
Q2. What should homeowners do if they are affected by the shutdown?
Homeowners should contact their mortgage lender early, use hardship programs, and check flood insurance to avoid missed payments.