What Happens to Your Mortgage in a Government Shutdown?

It’s official: as of today, October 1st, 2025, the looming government shutdown has taken effect. With all the talk about what this means, let’s take a closer look at how it could impact your mortgage, mortgage rates, and even the broader housing market. 

Delays in Processing 

Many mortgage applications rely on government systems for IRS verification, Social Security income verification, and other data to confirm a borrower’s financial information. During a government shutdown, those services may be reduced or suspended, causing mortgage processing delays for both new and refinancing borrowers. 

Government-backed loan programs (such as FHA loans, VA loans, and USDA loans) are especially vulnerable since they depend on agencies that may be furloughed or operating at reduced capacity. In past shutdowns, these programs experienced shutdown delays that pushed back closing dates and made it harder for first-time homebuyers to secure financing. 

Impact on Government-Backed Loans 

FHA loans and VA loans may experience slower approvals because of limited agency operations. Though, USDA loans have historically been the most affected. During previous shutdowns, the USDA temporarily halted new loans and postponed scheduled closings. 

Conventional loans, on the other hand, are less likely to be affected. These loans are not insured or guaranteed by the federal government and rely primarily on private lenders. That said, the shutdown impact can still ripple out if verification services stall or if there’s a data blackout that prevents lenders from accessing key financing information. Fannie Mae and Freddie Mac, which back many conventional loans, continue operating through a shutdown since they don’t depend on direct Congressional appropriations. 

Potential for Delayed Closings 

Mortgage closing delays are one of the most common issues seen during past shutdowns. Properties requiring National Flood Insurance Program coverage, for instance, can’t close if flood insurance policies can’t be issued or renewed. 

The housing market often slows when government-backed mortgages are delayed or buyers grow uncertain. In areas with a high concentration of federal workers or reliance on FHA, VA, or USDA loans, housing market volatility tends to increase. This causes reduced transaction volume, slower sales, and lower buyer confidence. 

Impact of the Shutdown on Mortgage Rates 

When the federal government shuts down, mortgage rates don’t always move predictably. Investors often react to uncertainty by shifting funds into safer investments like U.S. Treasury bonds, which can cause yields (and sometimes mortgage rates) to drop. However, with limited access to economic data during a shutdown (often called an economic data blackout), markets can become more volatile. 

That means the impact of a shutdown on mortgage rates could go either way. Some borrowers may benefit from temporarily lower rates, while others might experience fluctuations that make it harder to decide whether they should lock a mortgage rate during the shutdown. 

What This Means for You 

If you’re applying for a government-backed loan (such as an FHA, VA, or USDA loan) expect possible mortgage processing delays and added communication. 

It’s a good idea to remember to stay flexible and stay informed while the shutdown is in place. Closings may take longer, even if your financing is solid, and asking your lender if your file depends on IRS verification, Social Security income verification, or other government services will keep you on track.  

If you’re a new homebuyer, know that you can still buy a house during a government shutdown, but patience is key. Work closely with your lender and real estate agent to develop contingency plans in case of mortgage closing delays. While shutdowns can temporarily disrupt the mortgage and housing markets, most home purchases still move forward, just with slower timelines and a bit more uncertainty.  

FAQ: Mortgages During a Government Shutdown 

Will mortgage rates drop during a government shutdown? 

Mortgage rates sometimes dip slightly during a shutdown, but there’s no guarantee. Investors often move money into safer assets like Treasury bonds, which can lower yields and indirectly reduce mortgage rates. However, other market forces (like inflation and Federal Reserve decisions) can outweigh that effect. The bottom line: the impact of the shutdown on mortgage rates is unpredictable. 

Does the government shutdown affect my existing mortgage? 

No. Your existing mortgage will continue as usual. Your payments, escrow, and loan servicing won’t change, and your lender will still manage your account. The government shutdown effect on mortgage insurance or servicing only applies to new or pending applications, not current homeowners. You can safely keep making payments without interruption. 

Are FHA and VA loans delayed during a shutdown? 

Yes, borrowers with FHA loans and VA loans may see processing delays since those agencies often operate with reduced staff during a shutdown. While essential operations continue, fewer employees can slow underwriting and approval times. In past shutdowns, many borrowers experienced longer wait times between approval and closing. These effects can be especially challenging for first-time homebuyers relying on these loan types. 

Can I still close on my home during a government shutdown? 

Yes, you can still close, but the timeline may extend. Buyers using conventional loans are usually the least affected since Fannie Mae and Freddie Mac continue operations. However, borrowers needing flood insurance through the National Flood Insurance Program or loans backed by FHA, VA, or USDA could face mortgage closing delays. With some patience and preparation, most buyers can still successfully complete their purchase.