The shutdown has spooked many people about whether or not they will be able to secure financing for buying a home or refinancing a mortgage. While these concerns are certainly valid, it’s going to depend on your individual mortgage company, bank or mortgage broker on how your loan may or may not be affected. The general consensus is most loans are moving forward as this is usual during the shutdown, here’s the skinny…
There is only one type of mortgage that is presently not happening in all during the shutdown. The USDA (US Department of Agriculture) is shut down and is not guaranteeing USDA Rural Home Loans that allow a home buyer in certain parts Sonoma County to buy a home with no money down.
Contrary to popular belief, the FHA is insuring loans during the shutdown.
Shutdown Affect Loan Processing
In the process of originating mortgages on the books, lenders are required to validate certain aspects of borrower’s financial picture beyond supporting financial documentation. These things include validating IRS Tax Returns supplied by a borrower in procuring the mortgage as well as validating Social Security numbers.
IRS Tax Validations –for most local mortgage lenders, validating income tax returns are an integral component of processing a home loan. Borrowers execute a 4506 document allows the mortgage lender to scrub the tax returns you provided with IRS to make sure all of the data matches. If any of the data doesn’t match, explanations will be required. Moreover, the validation provides the final figures on the tax returns that impact a borrowers ability to qualify, so the importance of this information is crucial in the creation of a home mortgage. Tax validations come from the Internal Revenue Service, which of course is closed during the shutdown, which up until October 7, was an issue for many mortgage providers. Since then, Fannie Mae and Freddie Mac have allowed lenders to obtain the 4506 document from the borrower and appropriate tax validations will be completed after the loan has closed when the shutdown is over. *It is important to note, not all lenders have this capability, be sure to check with your bank, lender or mortgage broker regarding their stance on this.
Social Security Validations-seeking a home loan today? Make no mistake, your mortgage company is going to make sure your SSI # is validated. This has to do with personal identification in making sure lenders know specifically whoM they’re making a loan to.
The Social Security Administration wait for it…………….. are not validating Social Security Numbers for the purposes of helping consumers obtain mortgages. To compensate, lenders on a case-by-case basis are allowing borrowers to authorize them to obtain the Social Security validations after the loan has been completed, same as tax validations. *It is also important to note like the tax validation challenge, not all lenders are offering this convenience for borrowers, make sure to ask your lender for more company specific information.
Shutdown Affect On Mortgage Rates
The news of the federal government shutting down has absolutely influenced the financial markets. Interest rates have improved to the tune of 100 basis points over the last few weeks, causing rates to improve .25% on most loan programs for stellar credit types. While rates have improved, it’s due to the fact the shutdown is spelling bad news for the the economy. We’ll explain -the shutdown has created uncertainty which translates to perceived risk. Put another way, it’s an awful risky time to be invested in the stock market, so investors have move their money into the fixed income market, i.e. bonds which has caused yields to rise and rates to fall. When the shutdown ends, rates could rise and here’s why- the premise of the shutdown ending essentially is “lifting the cap”, remove the cap, and volatility ensues because investors will see opportunity in the stock market and capitalize on that opportunity, by moving their monies from bonds into equities, causing rates to potentially rise, by virtue of lower yields.
Opportunity Awaits In Negativity
If you’ve been waiting to start your Santa Rosa Mortgage, this is not the time to float rate. Use this as an opportunity to get the interest rate you tried to lock in at in June 2013. If you are in the process of buying a house, sellers are more open to contingent offers, low down payment financing, even slightly longer escrows. If you’re thinking about refinancing, we can run some complementary numbers for you to determine whether or not it makes sense, start with a rate quote. As a direct local lender, we also are successfully funding loans and offer the convenience of tax validation and Social Security validations after the close of escrow. Scott@sonomacountymortgages.com for the details!