As concerns mount over a potential U.S. government shutdown, many Americans are understandably worried about how such a disruption might affect their housing plans—especially those looking to take out a mortgage or refinance an existing home loan. Fortunately, housing experts say that while some minor delays could occur, the overall mortgage process is expected to continue largely uninterrupted for most borrowers, particularly those working with private lenders. However, individuals seeking government-backed loans may encounter some hurdles depending on which federal services are impacted by a shutdown.
The U.S. mortgage market is vast and varied, but the majority of loans are originated by private institutions such as banks, credit unions, and mortgage companies. These private lenders operate independently of direct federal funding and are likely to maintain their loan processing activities even if the federal government temporarily closes. Jeff Ostrowski, a housing analyst at Bankrate, reassures prospective homebuyers and refinancers that for those expecting to close within the next few weeks, any delays will probably be minor “blips” rather than deal-breaking obstacles.
That said, government agencies do play a significant role in the mortgage ecosystem, especially for certain types of loans. Agencies like the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA), and the Department of Agriculture (USDA) provide insurance or guarantees for qualifying loans, enabling more Americans to access affordable home financing. Borrowers applying for loans backed by these agencies may be more susceptible to processing delays if a shutdown occurs.
According to Holden Lewis, a senior writer at NerdWallet, conventional mortgages issued by private lenders are less likely to face complications during a shutdown. Conversely, those applying for FHA, VA, or USDA loans might experience minor hold-ups as these agencies adjust to furloughs or reduced staffing. The National Association of Realtors (NAR) provides further clarity, noting that the FHA generally continues approving most single-family mortgage loans during shutdowns, while the VA also maintains its loan guarantees. However, furloughs among VA workers could slow processing times, adding some uncertainty for veterans hoping to purchase or refinance homes.
Ostrowski points out that previous government shutdowns have not significantly disrupted FHA or VA loan programs, implying that while a shutdown introduces extra stress and uncertainty, it is unlikely to cause widespread mortgage failures. Nevertheless, because the VA and FHA collectively account for up to 25% of all mortgage applications—according to data from real estate company Redfin—veterans and other borrowers relying on these programs should maintain close communication with their lenders to anticipate any potential delays.
The USDA, which supports homebuyers in rural and certain eligible areas through direct and guaranteed loans, faces a starker impact if the government shuts down. The NAR explains that the USDA will halt the issuance of new loans during a shutdown, and even pre-scheduled direct loan closings will be postponed. This could delay home purchases or refinancing for families in rural communities who depend on USDA programs to afford homeownership. The USDA did not respond to requests for comment, but the agency’s actions during past shutdowns suggest similar interruptions may occur.
Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that underpin roughly 70% of the mortgage market, operate differently. They do not rely on federal funding in the way that FHA, VA, and USDA programs do, and historically, they have continued their operations during government shutdowns. Still, Anthony Smith, an applied economist at Realtor.com, warns that these entities depend on other federal agencies for certain verification tasks — particularly the Internal Revenue Service (IRS) for tax transcript verifications. If the IRS reduces or suspends these services during a shutdown, Fannie and Freddie may be able to approve loans but could struggle to complete final verification steps. This reliance could introduce processing delays even for conventional loans backed by these GSEs.
Another critical area of concern involves buyers purchasing homes in flood-prone zones. Federal mortgage rules require borrowers in these high-risk areas to secure flood insurance, which is typically provided through the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA). Experts caution that if FEMA operations are curtailed by a shutdown, it could become difficult or impossible for homebuyers to obtain or renew flood insurance policies, complicating or delaying mortgage closings.
Jeff Ostrowski explains that securing flood insurance could be a significant bottleneck during a government shutdown, potentially stalling closings for homebuyers who need this coverage. The NFIP underwrites over four million