Fed Shutdown Won’t Throw Big Wrench in Your Refi or Home Loan Plans

U.S. Capitol building Until Congress agrees on a budget, USDA home loans will be suspended. Fortunately, FHA, VA, and Fannie and Freddie loan programs will remain open. Image: Dennis Flaherty/Photographer's Choice RF/Getty Images

USDA rural loans, FHA reverse mortgages, and Title 1 home improvement loans are another story.

If you’re worried about the federal government shutdown because you’re refinancing your mortgage or buying a home with help from an FHA, VA, or Fannie Mae or Freddie Mac loan program, or you need federal flood insurance, relax. The shutdown isn’t likely to cause many problems for you — other than slower service.

But if you’re planning to use the U.S. Department of Agriculture 502 rural housing loan program, which helps folks buy homes in rural areas, you’re toast until Congress agrees to fund the federal government again.

USDA’s rural housing loan program typically runs out of money at the end of the fiscal year (Sept. 30), if not sooner, and then starts making loans again when the next fiscal year starts Oct. 1. This year, there’s no FY 2014 budget agreement so that means no more USDA home loans until Congress funds a budget. However, if your lender got a conditional approval before the shutdown, the lender can move forward on your loan.

Here’s the rundown on the homeownership programs that will (mostly) stay open even while the federal government is shuttered:

FHA will continue to insure most loans because its guarantees support the health and stability of the U.S. mortgage market. Expect some delays because of staffing shortages.

Two FHA exceptions: You won’t be able to get an FHA reverse mortgage (Home Equity Conversion Mortgage) or a Title I home improvement loan until the agency reopens.

The VA’s loan program will go on because it’s funded by veterans’ loan fees. As with FHA, expect some delays related to staffing.

Fannie Mae and Freddie Mac loan programs will be up and running because they aren’t federal agencies (although they’re under federal conservatorship).

FEMA will continue to sell and service flood insurance policies and fund disaster relief for homeowners, since the program is funded by premiums and not taxes. The shutdown won’t affect the flood insurance program rate changes set to kick in on Oct. 1, 2013.

Related: Keep up to date with housing news at the HouseLogic blog.