In the third week of the federal shutdown, the effects on the housing market are becoming more visible. Delays at federal agencies are slowing down mortgage approvals, and housing programs are running with fewer staff than usual. The pause on new flood insurance policies is creating extra hurdles for buyers in coastal communities. These disruptions add uncertainty and can lead to costly delays for homebuyers, homeowners, and lenders.

1. Delays in Government-Backed Loans (FHA, VA, USDA)

During a shutdown, mortgages that are supported by federal programs such as the FHA, VA, and USDA might not process as quickly. Some aspects of these programs continue, but more slowly, while others, such as new multifamily project approvals, can be delayed entirely.

2. Verification Bottlenecks (IRS and Social Security)

Lenders check people's income and identity with the IRS and the Social Security Administration. If those offices are understaffed during a shutdown, these checks can take longer — even for conventional loans.

3. Flood Insurance Interruptions

In many coastal and waterfront locations in Massachusetts, you need flood insurance to get a mortgage. Some closings may need to be put off if the National Flood Insurance Program (NFIP) isn't issuing or renewing policies during the shutdown.

4. Changes in Mortgage Rates

A government shutdown creates instability and uncertainty, which can cause the market to react in unpredictable ways. When investors turn to safer options, mortgage rates may actually dip in the short term. However, during a shutdown, lenders can face delays in getting essential information from federal agencies, making mortgage offers less attractive or causing processing slowdowns.

5. Local Financial Strain on Federal Workers

There are thousands of federal workers in Massachusetts, particularly in Worcester, Greater Boston, and on the Cape. Some borrowers might find it difficult to get loans or make their mortgage payments if paychecks are delayed or furloughs are implemented, which could slow down the local housing market.

Although it makes things more complicated, the housing transactions will continue during the government shutdown. However, you should anticipate potential delays, more paperwork, and longer timelines if you're in the process of buying while the shutdown endures.

It can make all the difference to have a team that understands how to overcome these obstacles. Liz & Ellie are available to answer any questions you may have regarding the possible impact of a shutdown on your Massachusetts real estate or mortgage plans.