Current Status: October 8, 2025
The federal government shut down on October 1, 2025, affecting millions of homebuyers nationwide. Here's exactly how each government-backed loan program is impacted:
USDA Loans
❌ HALTED
No new loans or guarantees. Pre-scheduled closings postponed.
FHA Loans
⚠️ DELAYED
Still processing but slower. Expect 1-3 week delays due to reduced HUD staffing.
VA Loans
✅ MINIMAL IMPACT
97% of VA staff working. Minor delays possible but most closings proceed.
USDA Loans: Complete Moratorium
🚨 USDA loans are the MOST affected by this shutdown:
- •No new loans: USDA will not guarantee any new home loans or issue new direct loans
- •Closings postponed: All pre-scheduled direct loan closings are delayed indefinitely
- •Conditional commitments halted: No new approvals being issued
- •Limited exceptions: Only Section 502 guaranteed loans with valid conditional commitments issued before Oct 1 can potentially close (at lender's risk)
Why USDA is Most Impacted
Unlike FHA and VA loans which rely heavily on private lenders, USDA loans require direct agency involvement for every guarantee. The Department of Agriculture has explicitly stated that no new rural housing loans, grants, or loan guarantees will be committed during the shutdown.
If you're in the middle of a USDA loan application or had a closing scheduled, contact your lender immediately to discuss alternatives.
Timeline Expectations for USDA Borrowers
FHA Loans: Processing Continues with Delays
The Federal Housing Administration (FHA) continues to endorse new single-family mortgage loans during the shutdown, but reduced HUD staffing creates processing bottlenecks.
What's Still Working:
- New FHA loan applications accepted
- FHA Case Number assignments continuing
- Mortgage Insurance Premiums (MIP) still processed
- Most scheduled closings proceeding
Expected Delays:
- IRS Tax Transcripts (4506-T): If IRS operates at limited capacity, income verification delayed 1-3 weeks
- HUD Processing: Reduced staffing means slower underwriting reviews
- Special Products: Home Equity Conversion Mortgages (HECMs) and Title I loans NOT processing
Bottom line: If you're already in the FHA pipeline, your loan will likely close, but budget an extra 1-3 weeks for processing. If you haven't applied yet, consider conventional loans for faster processing.
VA Loans: Minimal Impact
Good news for veterans: The VA is the most resilient government-backed loan program during shutdowns. An impressive 97% of VA employees continue working, ensuring minimal disruption to the home buying process.
VA Services Operating Normally:
- Appraisal orders processing
- Certificate of Eligibility (COE) issuance continuing
- VA Funding Fee submissions accepted
- Loan guarantees being issued
- Most closings on schedule
The VA's high staffing retention during shutdowns is due to mandatory funding for veteran benefits. While minor delays are possible (1-5 days), most VA loan applicants won't experience significant disruption.
✅ Action Item for VA Borrowers:
Proceed with confidence. If you're using a VA loan, the shutdown should not meaningfully impact your timeline. Confirm with your lender that they're ready to close on schedule.
Conventional Loans: Zero Shutdown Impact
Conventional loans backed by Fannie Mae and Freddie Mac are completely unaffected by the government shutdown. These loans are issued by private lenders and do not rely on federal agency approvals.
Low Down Payment Options:
- HomeReady (Fannie Mae): 3% down for income-qualified buyers
- Home Possible (Freddie Mac): 3% down for first-time buyers
- Standard Conventional: 5% down for anyone
Advantages Right Now:
- Normal 30-45 day processing
- No federal agency delays
- Predictable closing timeline
- Competitive rates (6.24-6.50%)
If your USDA loan is stuck or your FHA timeline is critical, switching to a conventional loan may be your best option. Many buyers qualify with minimal additional down payment. Learn more about conventional loan options →
What Bergen County Homebuyers Should Do Right Now
If You're Using a USDA Loan:
- 1Contact your lender immediately - Discuss switching to conventional or FHA if you have a purchase contract deadline
- 2Request contract extension - Work with your agent to negotiate 30-day extension with seller
- 3Explore alternatives - Get pre-approved for conventional 3% down or FHA 3.5% down as backup
- 4Monitor shutdown news - Congress may pass funding resolution within days or weeks
If You're Using an FHA Loan:
- 1Add 2 weeks buffer - If closing in next 30 days, notify all parties of potential 1-2 week delay
- 2Expedite documentation - Get all income/asset docs to lender immediately to avoid compounding delays
- 3Lock your rate now - If not already locked, secure current rate to avoid potential increases
- 4Stay in close contact - Weekly check-ins with lender to track FHA case number and underwriting progress
If You're Using a VA Loan:
- 1Proceed as planned - VA loans experiencing minimal delays, most close on schedule
- 2Confirm with lender - Verify they're ready to close and have received COE/appraisal
- 3Optional buffer - Add 3-5 day buffer to closing date if you want extra cushion
If You're Just Starting Your Search:
- 1Get pre-approved for multiple loan types - Conventional, FHA, and VA (if eligible) to maximize flexibility
- 2Prioritize conventional if possible - Zero shutdown risk, faster processing in current environment
- 3Build longer timeline - Add 60-day closing period to offers to account for potential delays
- 4Work with local expert - Lenders familiar with shutdown protocols can navigate issues faster
Expected Processing Timelines During Shutdown
| Loan Type | Normal Timeline | Shutdown Timeline | Status |
|---|---|---|---|
| USDA | 30-45 days | Indefinite (halted) | STOPPED |
| FHA | 30-45 days | 45-60 days | DELAYED |
| VA | 30-45 days | 30-50 days | MINIMAL DELAY |
| Conventional | 30-45 days | 30-45 days | NO IMPACT |
*Timelines from application to closing. Post-shutdown backlog may add 2-4 weeks to FHA/USDA.
Frequently Asked Questions
Will mortgage rates go up because of the shutdown?
Not directly. The shutdown may actually push rates slightly lower short-term as investors move to safer bonds. Current 30-year fixed rates are 6.24-6.27%, down from 7%+ earlier this year. However, delayed economic data (CPI, jobs reports) creates uncertainty that could cause volatility.
Can I switch loan types mid-application?
Yes, but it requires restarting underwriting. If you're stuck with a USDA loan, switching to conventional or FHA typically takes 2-3 weeks to re-underwrite. Your lender can often preserve your rate lock if you act quickly. Work with an experienced loan officer to make the transition smooth.
What if my closing is scheduled for next week?
USDA: Likely postponed unless you have rare conditional commitment exception. FHA: Probably proceeding but confirm with lender that all HUD steps cleared. VA: Almost certainly closing on time. Conventional: Definitely closing as scheduled. Contact your lender TODAY for status update.
How long will the shutdown last?
Unknown. The October 2025 shutdown began on October 1. Past shutdowns have lasted from 1 day to 35 days (2018-2019). Congress must pass a funding resolution or continuing resolution to end it. Monitor news daily and prepare for 2-4 week minimum impact.
Are seller concessions still allowed during the shutdown?
Yes, seller concessions are still allowed on FHA, VA, and conventional loans. FHA allows up to 6% seller concessions, VA has no limit, and conventional varies by down payment (3-9%). Use concessions strategically to cover closing costs if you need to preserve cash due to shutdown uncertainty.