Government Shutdown Could Delay Your Move Indefinitely


If you aren’t employed by the government and you have no plans on visiting national parks, it’s easy to think the government shutdown won’t affect you, but if you are trying to move into a new home, it might. Because the IRS is one of the agencies affected by the shutdown, your mortgage company might not be able to approve your loan.

The government shutdown could derail Cristina Bravo Olmo and Brett McBee-Wise from buying their dream house, a 99-year-old Craftsman in Rockridge. Before the sale can close, Bravo Olmo must finalize the sale of her one-bedroom condo in San Francisco’s Hayes Valley to a buyer who offered a bit more than the $699,000 asking price.

“We went through all sorts of inspections for the place and finally got over that hurdle,” Bravo Olmo said. “We thought the stressful part was behind us.”

But then came the shutdown.

“That put the brakes on,” she said. “The buyer cannot get her loan processed because her lender requested IRS documents and there is no one there to provide them.”

Source: SFGate

The holdup was because of a single document from the IRS – the 4506-T tax verification receipt to verify the buyers’ tax returns. The IRS is also used to verify Social Security numbers.

First-time home buyers will also be affected. The Federal Housing Administration is operating at a skeleton staff. Some lenders are authorized to issue FHA loans without the agency, though.

Even more potentially wide-spread for Bay Area buyers, though, is the fact that the Federal Emergency Management Agency is closed. For those looking to buy a home in a flood-prone area, FEMA’s closure could prevent buyers from getting flood insurance, which may be required to close the loan.

Rural home buyers will also be affected. The Department of Agriculture, who provides loans for rural properties, is also shut down.

Fannie Mae and Freddie Mac are running as usual, but with a bit of a risk. If, after the government is open, they find out that the borrowers’ documents don’t match IRS records, they might have to repurchase the loans.

The longer the government is shutdown, the longer it will take to deal with the impending backlog of requests – potentially delaying closings by days, weeks or even months.

Some sellers are delaying putting their homes on the market until the government is back up and running, since the pool of potential buyers is dwindling to those who have cash in hand.