While threats of another government shutdown seem to be on-again, off-again, some potential FHA borrowers are wondering if there will be a repeat of the stalemate that brought the longest government shutdown in recent memory. And will FHA home loans be available to first-time home buyers if the whole affair repeats itself again?
FHA Mortgage Loans Will Still Be Available During The Government Shutdown
The kind of loan you buy a home with, FHA forward mortgages, will continue to be serviced during a possible shutdown as previously reported here and elsewhere, as discussed in the HUD/FHA contingency plan released prior to the last shutdown.
Reverse mortgages, on the other hand, may once again be completely unavailable during the shutdown.
FHA loans that cannot be processed using automated means-those that require certain actions by the federal government via the FHA-may be delayed as they were the last time.
FHA Condo Loans During A New Government Shutdown
FHA condo loans may still be possible; in cases where a condo project requires FHA/HUD approvals under DELRAP, the Direct Endorsement Lender Review And Approval Process the loan may still move forward IF the FHA contingency plan from last time is used. But condo projects that require review under the HUD Review And Approval Process or HRAP did not move forward under that plan during the previous shutdown.
This begs the question some were asking last time, too–why, if FHA mortgage loans are available during the government shutdown, why aren’t USDA loans? How does the FHA get to continue operating while other government processes might not? Aren’t they both government-backed loans and doesn’t the government shutdown affect both government agencies the same?
The previous shutdown and a potential new one will not affect the FHA the same as it does the USDA loan program. Both government agencies have their own contingency plans to deal with such circumstances, but those plans aren’t standardized for all government offices.
The FHA’s prior shutdown contingency plans address their most critical needs, which includes the ability to allow new FHA home loans that can be underwritten automatically to move forward.
Home loans that require additional FHA involvement may be delayed, and that’s a factor all with lower FICO scores or “thin credit” (a small credit history or only one or two credit accounts that don’t have a long history) should be aware of-there may be additional waiting time for such loans until the government shutdown impasse can be resolved.
Do not assume you won’t be able to get a home loan with an FHA mortgage if there is a new shutdown but if you are in advanced stages of the home loan, be sure to ask your lender whether the potential of another government budget impasse includes affecting your loan.