Housing News

How Will the Government Shutdown Impact Homebuyers and Homeowners?

As the federal government shutdown continues, homebuyers and homeowners may be finding themselves in the crosshairs.

Those buying homes may experience some delays, while homeowners hoping to refinance their mortgages may be presented with some hiccups. However, most mortgages are still expected to close.

For most homebuyers and owners, previous shutdowns have just been temporary blips.

Only about 11% of real estate professionals said prior government closures impacted home sale signings or closings, according to a previous National Association of Realtors survey. Another 11% said the shutdowns affected potential clients.

“It is unclear how long the shutdown will remain in effect. In most cases, the short-run impacts will be minor,” according to the National Association of Home Builders (NAHB).

“A long-run shutdown, lasting several weeks or a month or more, could have significant impacts on mortgage accessibility and reduce housing demand,” the NAHB said.

The majority of U.S. mortgages are guaranteed by Fannie Mae and Freddie Mac, which shouldn’t be too affected by the shutdown. While these are government-sponsored enterprises, they don’t fall under the government’s purview in terms of funding or operations.

However, homebuyers seeking Federal Housing Administration (FHA) loans, U.S. Department of Veterans Affairs (VA) loans, and U.S. Department of Agriculture (USDA) loans may need to exercise more patience.

Additionally, the National Flood Insurance Program (NFIP) won’t be issuing new policies or renewing existing ones during the shutdown. This could cause complications for those purchasing homes or living in flood zones where the insurance is required to get a mortgage.

“One immediate impact of the shutdown is the potential for delays in home sales transactions,” Lisa Sturtevant, chief economist of Bright MLS, said in a statement. The multiple listing service covers the mid-Atlantic region.

VA loan holdups are likely to be minor while the government is shutdown

The VA plans to continue guaranteeing VA loans during the shutdown. That means that active members of the military, veterans, and qualifying spouses should still be able to purchase homes or refinance their existing loans.

However, homebuyers should anticipate processing or other minor holdups until the government reopens.

FHA buyers could experience hiccups until the government reopens

FHA loans will continue to be made for single-family homes. Buyers should be prepared for delays in processing and closing.

However, new loans for multifamily homes as well as most reverse mortgages for older homeowners will be paused until the government reopens.

USDA loans could take longer to close during a government shutdown

Homebuyers using USDA loans should expect delays during the shutdown. The USDA will cease issuing these loans, which are popular with buyers in more rural and suburban areas outside cities as they generally don’t require down payments, until the government reopens.

Buyers who already received a commitment for a USDA loan should have their loans proceed as normal. Loans that weren’t approved will have to wait until the shutdown ends.

During prior shutdowns, just 1% of Realtors experienced a closing delay with their clients due to a USDA loan, according to NAR.

Homebuyers and homeowners could have trouble securing flood insurance

The National Flood Insurance Program (NFIP) can’t issue new policies until the government reopens. This could result in delays, cancelled closings, or other issues in flood-prone areas during the shutdown.

Home sales and policy renewals in states like Florida, Texas, Louisiana, and other states are likely to be temporarily stalled.

However, only a very small portion of all homes nationally are covered by the program. Just 3.3% of all homes across the country were insured through the NFIP between 2023 and 2024, according to a ValuePenguin study.

Many lenders will suspend coverage requirements during a shutdown. And homebuyers and owners may be able to get private insurance, although rates may differ.

Generally, Congress reauthorizes the NFIP retroactively once the shutdown ends. And insurance contracts that began before Oct. 1 will continue until the end of the policy.

What a government shutdown means for you

Government shutdowns are temporary. While they can cause delays and headaches, the impacts are generally temporary.

“Prospective buyers with jobs not tied to the federal government will find opportunities to get into the market with more [housing] inventory and softer prices,” said Sturtevant in a statement.

“Existing homeowners who do not have to move, or who have a significant amount of equity in their homes, won’t necessarily feel an impact.”