We all woke up Tuesday morning to the federal government shutdown. Although we don't expect a major impact on our local real estate market pace and values, there will be an effect on a major faction of the business — i.e. getting the money for purchases. So just what does this mean for loans?
For those who watch the bond market and loan rates, it has become clear over the years that the anticipation of such an event is more impactful than the actual event. We’re not seeing a drastic reduction in rates.
The real impact of this will be on the processing side of loan applications. The Federal Housing Administration has stated it will continue to insure loans during the shutdown, but with a reduced staff this may take longer. The Internal Revenue Service is also understaffed. That means a longer delay for 4506T/Transcript processing. This will really impact borrowers who just filed their 2012 returns and need that income to qualify.
Loans are absolutely going to be made. There is no shutdown in the mortgage machine; they just may take more diligence and time.
As a buyer, you need to prepare yourself by getting as far along in the approval process as you can — before you write an offer. This is always the case, but even more so now when the verifications required are completely out of your or your lender's hands. The best thing to do is get documentation into your mortgage professional quickly and in full. Trust them that they need that one document that you're having trouble putting your hands on and be ready to jump when they call.
As a seller, you may be asked to practice a level of patience well beyond what the contract states and your expectations may be. Remember that every buyer getting a loan may have these same delays.
This could be a very temporary shutdown, but the longer it goes on, the more difficult the lending environment will get, and even after it is over the effects will linger.
Preparation and patience will be the more successful path through this for the sales for the rest of the year.
— Laurel Abbott is a real estate agent with Prudential California Realty and president of the Santa Barbara Association of Realtors. Contact her at firstname.lastname@example.org or 805.879.8050. The opinions expressed are her own.