Following the past week of disarray since the government shutdown, many prospective home buyers have expressed concern over the impact this will have on the mortgage lending industry. For many, concerns may be increased as we approach the October 17th deadline to increase the debt ceiling in order for the federal government to meet its financial obligations. The following is provided by Las Vegas Custom Loans to educate consumers, and perhaps, alleviate potential home buyer concern.
In contrast to what many may believe, there are actually potential benefits to the mortgage lending industry as a result of the government shutdown. For example, we may see a slight decrease in mortgage lending rates, especially if the shutdown continues for an extended period. Although this notion may seem puzzling to some, clarity can be gained through understanding basic premises upon which mortgage rates are calculated. As explained by Brian O’Connell, a business writer whose articles have appeared in The Wall Street Journal, CNBC, and CBS Marketwatch, to name a few, in an October 4th publication for Forbes, entitled ‘4 Ways Government Shutdown Affects New Mortgages:’
“By and large, mortgage rates move with the direction of the economy. If banks and mortgage lenders think the economy is slowing – as it likely will under a prolonged shutdown – they will lower rates to attract more business.”
While, for many the government shutdown is clearly troubling, specifically for government employees and more significantly in terms of the overall economic effect on our nation, the immediate impact on prospective home buyers might perhaps be viewed as a beneficial one. However, this is largely dependent on both the type of loan you are seeking, as well as the stage in the lending process that you are currently at.
For those seeking a government backed type of loan, such as a Federal Housing Administration (FHA) loan or a USDA loan, consumers may face delays in loan processing, as a result of the furlough in federal employees. If you have already obtained loan approval, and are awaiting appraisal, potential delays may occur for those who have not yet been issued an FHA case number. This case number must be obtained prior to appraisal.
In addition, if you are in the initial lending stages, regardless of which type of loan you are seeking, there could be difficulties in obtaining documents verifying borrower income and social security numbers, which may be necessary to lending determinations. Although you may have copies of recent tax returns, many lenders require verification, by obtaining a certified transcript from the I.R.S. through the use of Form 4056T. To avoid delays with the Social Security Administration (SSA), locate your social security card and keep handy.
As the government shutdown persists, Las Vegas Custom Loans would like to ease consumer concern regarding the current status of the mortgage industry. As stated by the author in the previously referenced Forbes publication, “[t]he mortgage market should largely remain up and running during the government shutdown, and home buyers may even get a bonus, if mortgage rates keep falling while government agencies are shuttered.”
If you would like to discuss the impact the government shutdown may have on your loan process,
contact Casey Moseman at (702) 271-1274