How to Make Sure the Shutdown Doesn't Cost You Your Dream House
NEW YORK ( TheStreet) -- As if buying a home doesn't have enough headaches, the partial government shutdown has added another: likely delays in getting government verification of your Social Security number and tax return, both needed for the loan application.
Even worse, borrowers seeking loans from the Federal Housing Administration are likely to find that a lack of staffing will put their application on hold. And after federal employees do get back to work, they're not likely to clear out the paperwork backlog overnight. Who knows how long it could take to get back to normal?
People who already have applications in the works may have little recourse but to chew their nails and, if deadlines for mortgage approvals are missed, throw themselves on their seller's mercy. Since the seller usually wants to sell, postponing the closing might not be a problem. Unless, of course, another buyer has topped your bid in the meantime.
A buyer who is about to make an offer and submit a loan application can take a few precautions, with advice from the real estate agent, lender and perhaps a lawyer, to make delays as easy to survive as possible.
First and most obvious is to leave more time for the closing.
Buyers taking out loans typically make the sale contingent on getting a loan by a certain date at a rate not to exceed a specified amount. In making an offer to buy, you might do well to push the closing date back a couple of weeks or more if the seller is willing. To take the sting out of this, specify that you are willing to close earlier if your loan is approved.
Fortunately, mortgage rates have been drifting down, so there's a good chance a modest delay won't result in a higher rate on your loan. Again, the maximum rate you are willing to pay should be specified in the purchase offer.
It also could pay to opt for a longer lock-in period for your mortgage rate. That's the period during which the lender guarantees the agreed-upon rate. Be sure to explore your options carefully, as there could be a cost to choosing a longer lock-in period. This should be a factor in shopping for a mortgage.
It's always wise to be supremely well organized when buying a home or applying for a mortgage, and that's doubly true when there are unusual snags. So be sure to get lists from the lender, Realtor and title company of all the documents you will need and when, then get them all in hand. A delay in the government's role could cause a backlog with the lender and title company as well, and you don't want to make matters worse by not having a proof of income or some other document the moment it's required.