What Happens to My Federal Loans Now That the Government Shutdown Is Over?

Now that the longest government shutdown is over, it's back to business for the housing market, but don't expect services to get back to normal overnight. Homebuyers and homeowners who are hoping to secure certain types of mortgages will still need to practice patience.

For those applying for a government-backed mortgage, it's important to note that federal housing programs did not cease completely during the shutdown, but many agencies were slow to process applications.

Among the government loans affected were Federal Housing Administration (FHA), Veterans Affairs (VA), and USDA loans.

The government shutdown started on Oct. 1, and key housing and mortgage programs were operating at limited capacity—some working with reduced staffing or paused altogether. This left buyers in limbo and sellers waiting.

Members "from across the country have reported stalled FHA, VA, and USDA loans, as well as halted new flood insurance policies, creating real economic harm that rippled through local economies each day the shutdown continued," Shannon McGahn, chief advocacy officer and executive vice president of the National Association of Realtors®, said in a press release.

"There is a six-week backlog with many of these programs, so I would expect there to be some additional delays as they work through them."

If you're waiting on your application to be processed or you're ready to apply for a federal loan, just remember it will still take a little longer than normal.

"Borrowers beginning or in process for FHA or VA financing should be prepared for a lengthy process, especially as we enter the holiday season," Brian Shahwan, vice president, mortgage banker, and broker at William Raveis Mortgage, tells Realtor.com®. "While there can be many benefits for going the FHA or VA route, speed is not necessarily one of them right now."

Shahwan says he has seen an uptick in buyers reaching out for pre-approval letters and to get an update on the overall market.

"I don’t believe this is solely due to the end of the government shutdown, but also regarding this week's 50-year mortgage news, the Fed decision, impact of the recent election, and more," he adds.

Mortgage moves

For those ready to secure a bank loan or refinance, there are several things to consider. Mortgage rates are constantly changing, which we witnessed during the shutdown.

Currently, mortgage interest rates for a 30-year fixed loan are 6.24% for the week ending Nov. 13, according to Freddie Mac. The rate ticked up 0.02% from the prior week, but it's still trending lower than the same period a year ago, when it was 6.78%.

Bob Driscoll, senior vice president and director of residential lending at Rockland Trust, explains to Realtor.com that the mortgage market changes quickly.

He advises borrowers who are ready to refinance that timing will depend on their personal financial readiness.

"If you’re financially prepared and the numbers make sense, that’s the right time to move forward," says Driscoll. "I always advise against trying to time the market because it’s just too unpredictable. If rates improve later, refinancing again is always an option."

Plus, as we approach the holiday season, that will factor into the approval process.

"While it is still possible for homebuyers to close on a new home or refinance before year-end, it is important to keep in mind that with the holidays approaching, banks may experience slower-than-usual turn times," Shahwan says.

"My advice would be to ensure the loan officer has all borrower documents ready to go once the fully executed contract is available," Shahwan explains.

He adds that every bank may have different turn times and holiday hours, so it's best to speak with your loan officer to understand the likelihood of closing before year-end.

"While the underwriting process may be quick, appraisal and title reports may take time, so [it's] always better to understand realistic timelines in order to manage expectations," Shahwan adds.