How A Government Shutdown Could Affect Real Estate And Your Closing
A potential government shutdown makes headlines fast and it can ripple into housing. Most purchases still close, but some parts of the process slow down or require a workaround. Here is a clear look at what typically happens, what could delay your file, and how to protect your timeline.
What Usually Keeps Moving
- Conventional loans sold to Fannie Mae and Freddie Mac
The agencies continue to buy loans. Lenders may use alternative documents if certain federal verifications are delayed. - Title work and recording
Counties handle deeds, mortgages, and liens. These are local offices, so most keep normal hours. - Private insurance and private flood insurance
Non federal providers can still bind coverage if they are writing in your area.
Where Delays Often Show Up
- IRS income transcripts
Many lenders pull IRS transcripts using Form 4506 C to confirm the income shown on your tax returns. During prior shutdowns, that service slowed or paused, which pushed some clear to close dates. - Social Security number verification
Lenders verify identity with the Social Security Administration. If that channel pauses, some files wait or use alternative documentation. - USDA Rural Development loans
USDA guaranteed loans are processed by a federal office. In past shutdowns, many USDA files could not receive final approval until staff returned. - FHA files that need manual touches
Most FHA lenders keep underwriting, but endorsement and case level questions can pile up when staffing is limited. Condo approvals and other exceptions are slowest. - VA loans
VA lending generally continues, yet appraisals, Certificates of Eligibility, and certain help desk items sometimes take longer. - Flood insurance through the National Flood Insurance Program
If program operations are limited, issuing new NFIP policies or increasing coverage can be restricted. Some buyers switch to a private flood policy to stay on schedule. - Borrowers who work for the federal government
If income is reduced during a furlough, a lender may ask for updated employment letters or proof of reserves to confirm the ability to repay.
What Buyers Should Do Now
- Talk to your lender today
Ask exactly which verifications your file requires and whether they have alternatives if a government system pauses. Get a written list. - Order third party items early
Transcripts, verifications, condo documents, and flood quotes are best started right away rather than near closing. - Choose a rate lock with a cushion
Consider a lock period long enough to absorb an unexpected pause. Ask what an extension would cost and whether a float down option is available. - Add a shutdown addendum if needed
Your agent and closing attorney can draft language that automatically extends timelines if a federal service delay is the only thing stopping closing. - Have a back up plan for USDA
If you are using a USDA loan, ask your lender whether a switch to FHA or conventional would be possible if timing becomes critical. - Confirm insurance early
If the home is in a flood zone, secure quotes from both NFIP and private carriers. Bind coverage as soon as your lender allows. - Keep documents flowing
Respond quickly to every lender request. Fresh pay stubs, bank statements, and gift letters can offset other slowdowns.
What Sellers Should Do Now
- Be flexible with timelines
If the buyer is otherwise ready and a single federal verification is stalled, a short extension usually saves the deal. - Tighten disclosure and repairs
Clean, complete disclosures and quick access for appraisers and inspectors prevent avoidable delays while everyone watches the calendar. - Ask your listing agent to monitor buyer progress
Regular check ins with the buyer lender and closing team help you spot issues early.
What To Expect At The Closing Table
Most transactions still fund. The files that typically slip are those that rely on a federal approval or verification that is temporarily unavailable and for which the lender has no substitute. The best predictor of success is communication. When the buyer, seller, lender, and closing attorney share updates daily, you can pivot fast.
Bottom Line
A government shutdown can slow certain verifications and specific loan programs, but preparation and smart contract planning keep most deals on track. Start items early, choose partners who communicate, and build in a little extra time.
Need Straight Answers For Your Situation
If you want help pressure testing your timeline due to the government shutdown or if you would like an introduction to a responsive lender and a results driven real estate agent in your market, reach out to me. Send me a note with where you are buying or selling, your target closing date, and any questions. I will share tailored next steps and connect you with a trusted pro who can keep your deal moving.
