The federal government has officially shut down today, and for Americans in the home-buying or refinancing process, this raises serious questions: how will your mortgage be affected, if at all? The answer is that some parts of the system will keep running, while others may hit delays—particularly for those using government-backed loans or needing flood insurance in certain areas.
Will private lenders still process mortgages?
Yes, for the most part. The bulk of the mortgage market is run by private lenders (banks, credit unions, mortgage companies) issuing conventional loans, and these operations do not depend directly on new federal appropriations. As a result, these lenders can continue processing, underwriting, and closing conventional mortgages even during a shutdown.
Still, there is a catch: even private lenders often rely on certain federal services, such as IRS tax transcript verifications or flood insurance issuance, which might see interruptions. If a loan file requires one of those services, the shutdown could create a bottleneck.
Jeff Ostrowski, a housing analyst at Bankrate, said, “If you’re expecting to close in a week or a month, there could be some slight delay. But I think for most people, it’s probably going to be a blip more than a real deal killer.”
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What about government-backed mortgages (FHA, VA, USDA)?
This is where the impact is more likely to be felt.
- FHA (Federal Housing Administration): The FHA will continue to endorse single-family mortgage loans in the near term, but staffing cuts may slow down some processes. Larger programs (multifamily, Title I, reverse mortgages) may be affected.
- VA (Veterans Affairs): The VA guarantees home loans, and those guarantees should continue. However, agency furloughs may delay the processing or certification steps.
- USDA (Rural Housing Loans): This may be hit harder. New direct or guaranteed rural housing loans likely cannot be issued during the shutdown, and closings already scheduled could be postponed.
So if you were counting on an FHA, VA, or USDA loan, you should check with your lender or agency to see whether your application timeline is at risk.
How will flood insurance disruptions affect mortgage closings?
One of the trickiest parts of this shutdown for mortgage applicants involves flood insurance. If your home is in a flood zone or requires federally backed financing, you must have flood insurance to get a mortgage.
Because the National Flood Insurance Program (NFIP) requires Congressional reauthorization, one consequence of the shutdown is that no new flood insurance policies or renewals may be issued while the program is not authorized.
That means for homes requiring flood coverage, closings could come to a standstill if the required flood policy cannot be obtained. Analysts warn that thousands of home transactions daily could be affected in flood-prone areas.
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What about closing delays, document verifications, and backlog risks?
Even where primary loan processing continues, other supporting tasks such as these may be slow:
- IRS services: If the IRS suspends transcript services or tax verification requests, lenders may be unable to complete underwriter checks.
- Support services and compliance reviews normally handled by federal agencies — such as environmental reviews for HUD projects — may stall or slow.
- Companies like Fannie Mae, Freddie Mac, and Ginnie Mae may continue core functions (they are not directly funded by annual appropriations), but their ability to work around federal dependencies may be constrained.
In short: expect possible delays, especially if your home purchase involves layered federal steps.
Who is most at risk in this shutdown?
The greatest pain is likely to fall on:
- Buyers relying on USDA rural home loans
- Homebuyers in flood zones needing new flood policies
- Applicants for multifamily FHA projects or complex HUD-backed financing
- People who are self-employed, relying on tax transcript verifications
- Veterans or borrowers using VA guarantees where agency backlog emerge
For many others using conventional mortgages, the effects may be minimal unless supporting systems get disrupted.
