Government Shudtown impacting lending

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blog-author-clayjeffreys3

UPDATE – As of 10/07/2013 – most of the lenders I use are allowing loans to close for W2 salaried borrowers as long as their employer completes a full Verification of Employment. Since the government (and IRS) is still shut down, this is great news for some. Those who are self employed or make most of their money from commission/bonuses will not be able to close until a tax transcript can be provided from the IRS.

With the government shutdown (which is still on as of this post) in full swing, most people assume they will still be able to close their home loan if it isn’t a government loan such as an FHA, VA or USDA loan.

The truth is the shutdown could literally shutdown closings regardless of the type or purpose (purchase or refinance). Why? The government shut down also closed the IRS. That wouldn’t be a huge deal a few years ago, but it is today.

Why?

The reforms in the mortgage industry and underwriting brought the IRS into the middle of the loan process. In order to close on a loan, the IRS must supply tax return transcripts from the previous two tax filing years. It doesn’t matter if you are a W2 salaried employee, self employed, 100% commission, etc… if you are applying for a home loan, tax transcripts are required.

Until the government is up and running again, the IRS won’t process the tax transcript requests. As of today, requests are piling up. The longer this goes on in DC, the larger the pile of requests will get. Eventually this will begin delaying closings, rate locks could expire, emotions will run high… fun times.

Fortunately, government shutdowns only last a few days. I’m sure DC will figure this out soon (fingers crossed!).

In the meantime, juts realize the shutdown could impact your home loan even if it isn’t a government loan.

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