How a Government Shutdown Could Affect Buying or Selling a Home

When the federal government experiences a shutdown — meaning some agencies close or reduce staff until funding is restored — many industries feel ripple effects. Real estate is one of them. If you’re in the process of buying or selling a home, it’s important to understand what may change and what usually continues as normal.

Mortgage Applications and Loan Approvals

Most mortgages depend on some level of federal involvement. Even if your loan is through a private lender, many banks rely on federal agencies to verify information.

FHA and VA loans: These programs may slow down during a shutdown because fewer staff are available to process applications and endorsements.
IRS income verification: Lenders often request transcripts of tax returns directly from the IRS. If those services are unavailable, it can delay loan approval.
Conventional loans: Fannie Mae and Freddie Mac typically continue operating, but delays in verification may still slow the process.

Takeaway: If you’re applying for a mortgage during a shutdown, prepare for possible delays in approval.

Flood Insurance (For Certain Properties)

If you’re buying or selling a property in a federally designated flood zone, federal flood insurance may be required.

The National Flood Insurance Program (NFIP) must be active for policies to be issued or renewed.
During a lapse, new policies or renewals may pause. Without valid coverage, many lenders will not allow a closing to go forward.
Industry groups estimate a lapse in NFIP could put over 1,000 home sales per day at risk nationwide.

Takeaway: Homes in flood zones are most directly affected by a shutdown.

Economic Data and Confidence

The housing market depends on interest rates, job reports, and consumer confidence.

Agencies like the Bureau of Labor Statistics may pause data releases during a shutdown.
This creates uncertainty in financial markets, which can make lenders more cautious.
In the short term, investors sometimes shift money into safer assets, which can even lower mortgage rates temporarily.

Takeaway: Interest rates could move unpredictably, but most effects are short-term.

Delays and Possible Cancellations

In some cases, shutdown-related issues can stall or even cancel transactions.

If your loan depends on federal processing or flood insurance, you may need to push back your closing date.
Some contracts include clauses to extend deadlines for this reason.
Buyers and sellers who can remain flexible are more likely to get through the process with minimal disruption.

Takeaway: Expect possible delays, but most transactions eventually close once operations resume.

What Home Buyers and Sellers Can Do

Stay in touch with your lender and agent. Ask if your transaction relies on federal verification or flood insurance.
Build in extra time. Be prepared for a slower process during a shutdown.
Explore alternatives. Some lenders may offer different verification options if federal systems are unavailable.
Don’t panic. Past shutdowns have caused delays but not a collapse of the housing market. Once funding is restored, most backlogged transactions move forward.

Bottom Line

A government shutdown usually does not stop the housing market, but it can slow down certain steps in buying or selling a home. The biggest risks are for buyers using federal loan programs or purchasing in flood zones. For most others, the impact is more about timing than outcomes.

If you’re planning to buy or sell, the best approach is preparation and patience. Stay in touch with your agent and lender, ask questions, and be ready for possible delays — but rest assured that most transactions continue once the government reopens.

About Frank Campobasso

Frank Campobasso is a seasoned real estate professional with over 20 years of experience helping clients throughout Chicagoland and the surrounding suburbs. He specializes in buying and selling single-family homes, condos, townhomes, multi-unit buildings, and investment properties. Known for his expert negotiation skills, transparent communication, and digital marketing savvy, Frank has been featured in Top Agent Magazine, Chicago Agent Magazine, newspapers, and radio shows for his real estate expertise.

📱 Call or Text: 773-425-6265
🏡 Century 21 Circle
🌐 www.CampoSellsHouses.com
⭐ Reviews: www.realsatisfied.com/Frank-Campobasso