Getting a Mortgage During the Shutdown? Expect Delays

This isn’t speculation anymore. I talked to an excited new homebuyer just yesterday, whose offer had been accepted from among multiple bids on a home in Berkeley, but whose mortgage broker had warned him that the closing could be delayed.

IRS wall_0Why? Because the lender will need to get his tax transcript from the IRS, and as part of the federal government shutdown, the IRS tax-transcript department has been furloughed. Even if the entire IRS were to reopen tomorrow, chances are their inboxes are already overflowing with backed-up requests.

So now, our new homebuyer waits. And he’s not even applying for a loan that specifically involves approval by the federal government, such as a FHA loan, USDA loan, or VA loan.

Fortunately, most every standard home purchase contract in California is written with a contract contingency stating that if the buyer can’t get a mortgage, he doesn’t have to go through with the sale. Unfortunately, the homebuyer is expected to take care of this and remove the financing contingency by a date even earlier than the closing, or face the possibility of the deal falling through.

In unusual circumstances such as these, however, it’s worth remembering that contracts are nothing more than an expression of the mutual interests of the parties involved. In this case, I would think both seller and buyer would be amenable to negotiating a delay of the contingency and closing dates so that the sale can go through as planned, and everyone can get back to watching CNN to find out when the folks in Washington, DC are going to end this nonsensensical shutdown.