There's been a lot of confusion and uncertainty about how a government shutdown will affect VA home loans.
The good news is there would likely be minimal impacts on VA lending if the government shuts down on October 1, which is the start of a new fiscal year. Lenders would still be able to order appraisals, obtain a borrower's Certificate of Eligibility, submit the VA Funding Fee and more.
In short, Veterans would still be able to use their home loan benefit to buy a home or refinance an existing mortgage.
During the last government shutdown in 2018-2019, some lenders reported issues obtaining documentation or verifications for prospective borrowers. Veterans United was able to troubleshoot issues with the VA and other stakeholders and find solutions to keep our Veteran borrowers on track.
Most VA employees would remain in their roles during a shutdown, either because they're in fully funded positions or they're exempted given the important nature of their work.
The shutdown story looks similar with FHA loans, which didn't experience major widespread impacts from the last government shutdown. But every buyer's situation is different.
The Department of Housing and Urban Development would close its regional and field offices with limited exceptions during the shutdown, and that means borrowers with unique situations that require a closer look from HUD could experience delays.
The FHA's condo approval process is also on hold during the shutdown.
Conventional lending would experience minimal impacts because of the shutdown, in part because these loans aren't backed by the government.
But USDA borrowers could be significantly impacted. The Rural Development didn't guarantee any loans during the previous government shutdown. Depending on how long a shutdown lasts, some buyers might see deals fall through, with potential ripple effects for those already under contract to sell their current home.
The Loan Guaranty program is one of many programs and services the VA says will not be impacted by a shutdown.
"“In the case of a shutdown, there would be no impact on veteran health care," VA Secretary Denis McDonough told reporters recently. "Burials would continue at VA national cemeteries. VA would continue to process and deliver benefits to veterans, including compensation, pension, education and housing benefits. And the board would continue to process appeals."
But some services and outreach would slow or stop. The VA's regional offices would close until a shutdown ends. Transition support services, career counseling, health care inspections and other functions would be suspended.
A prolonged shutdown could make it difficult for some VA homeowners to stay current on their mortgage.
During the previous shutdown, the VA encouraged lenders and servicers to extend forbearance to homeowners in distress.
They also encouraged mortgage servicers to waive fees and penalties for late mortgage payments and to suspend credit reporting to the credit bureaus. Even just one 30-day late mortgage can take a toll on consumer credit.
In the event of a government shutdown, talk with your mortgage servicer as soon as possible if you anticipate having problems making your monthly mortgage payment.
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Buying a condominium with you VA home loan benefit is a great option. However, there are additional requirements that differ from purchasing a single-family residence or a multiunit complex.
VA loans allow Veterans to have a co-borrower or co-signer on the loan. Here we break down co-borrower requirements and provide common scenarios around co-borrowing and joint VA loans.