What the Government Shutdown Means for the Real Estate Industry

Today, on October 1, 2025, the federal government shut down after lawmakers failed to pass a funding bill. Many essential services are still running, but the shutdown may already be affecting parts of the housing market. If you’re buying a home, selling one, or paying a mortgage, it’s important to understand what this means for you.

This guide breaks down how the shutdown affects mortgage programs, closings, and services across the real estate industry to let you know what you can do to prepare.

What is a Government Shutdown?

A government shutdown happens when Congress doesn’t pass a budget or temporary funding bill to keep agencies open. When that happens, many federal workers are furloughed, services pause, and agency work slows or stops.

Some shutdowns last only a few days. Others stretch for weeks. Because we don’t know how long this one will last, planning ahead is the best way to avoid surprises in your homebuying or mortgage process.

How Does the Shutdown Affect FHA Loans?

The Federal Housing Administration (FHA) helps many homebuyers qualify for mortgages, especially first-time buyers. During a shutdown, FHA loan services continue, but with fewer staff.

That means:

1. New loans are still being endorsed. Most FHA loans will continue to move forward, but some types, such as those that require manual underwriting, may be delayed.
2. Online systems stay open. Lenders can still use FHA Connection and other systems, but any transactions requiring staff review may take longer.
3. Customer support is limited. FHA Resource Centers will still answer simple questions. More complex issues may need to wait for the restoration of funding.

If you’re using an FHA loan, you can probably still close on your home, but the process may take longer. Stay in close contact with your loan officer so you know what to expect.

Will the Shutdown Slow the Processing of VA Loans?

The Department of Veterans Affairs (VA) usually keeps its loan guaranty programs operating at reduced capacity during a shutdown. This means VA loans will still be processed, but you may notice delays.

If you’re using a VA loan, talk with your loan officer early and often. Allow for extra time for underwriting and approvals, as the VA operates with a limited staff.

Are USDA Loans Affected by the Shutdown?

Buyers using the USDA’s mortgage programs will likely feel the most significant impact. In past shutdowns, the USDA Rural Development office has stopped most loan operations, and it will likely be the case again.

Here’s what that means:

1. New USDA loan guarantees are paused until funding resumes.
2. Some ongoing functions continue. Construction draws, claim reviews, and foreclosure support may still happen with leadership approval.

If you’re buying a home with a USDA loan, plan for potential delays or discuss backup options with your lender. This is especially important if you’re on a tight timeline to close.

Will Fannie Mae and Freddie Mac Remain Stable?

Fannie Mae and Freddie Mac buy and guarantee many conventional mortgages. Annual congressional budgets do not fund them, so their work continues during a shutdown.

There may still be minor slowdowns if they depend on services from other agencies that are closed or operating with limited staff. But overall, conventional mortgage operations should remain steady.

Could Flood Insurance Interruptions Delay Closings?

The National Flood Insurance Program (NFIP) expired at midnight on September 30, coinciding with the government shutdown. Existing flood insurance policies remain valid until they expire; however, new policies, including renewals, cannot be issued until the program is reauthorized.

Lack of flood insurance can be a major problem if you’re buying a home in a flood zone. Most lenders require flood insurance before closing, which could delay transactions until Congress restores the program.

If this affects you, contact your loan officer and insurance agent right away to review your options.

How Can Furloughs Affect Buyers and Homeowners?

Federal workers who are furloughed and not receiving pay may face challenges during the homebuying process. Lenders verify employment and income before closing, and changes in income can affect loan eligibility. Each situation is different, and decisions will be made on a case-by-case basis.

Homeowners who lose income during a shutdown and struggle to make mortgage payments should reach out to their loan servicer as soon as possible. Many servicers offer temporary payment relief or forbearance options during extended shutdowns.

What Should Builders Expect During a Shutdown?

Builders may see more delayed closings, especially for buyers using FHA, VA, or USDA loans. The length of the shutdown and the type of financing will determine the impact. Communicating with buyers and their lenders early will help keep projects and timelines on track.

What Homebuyers and Homeowners Can Do Now

While many parts of the mortgage process will continue during the shutdown, you can take steps to protect your plans:

1. Talk with your loan officer. They can explain how the shutdown affects your specific loan and what to expect for timing.
2. Plan for possible delays. Build extra time into your schedule, especially if you’re using FHA, VA, or USDA financing.
3. Contact your loan servicer if needed. If your income is affected and you can’t make payments, ask about assistance programs.
4. Review flood insurance needs early. If your property requires flood insurance, check the status before closing to avoid last-minute surprises.

FAQs About the Government Shutdown and Real Estate

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

Yes, most home purchases can still close. However, FHA, VA, and USDA loans may experience delays, and flood insurance requirements could hold up closings in flood zones.

Are FHA loans affected by the shutdown?

FHA loans continue to be endorsed, but some programs and steps that require staff review could slow down.

What happens to flood insurance?

Existing NFIP policies remain valid, but new policies and renewals cannot be issued until the program is reauthorized. This could delay closings on properties in flood zones.

What should I do if I can’t make my mortgage payment?

Contact your loan servicer right away. Servicers may offer temporary assistance programs during extended shutdowns.

It is important to remember that the government has shut down before, so we have historical data to know what happens next. Government shutdowns create uncertainty, but they rarely stop real estate transactions altogether. Most mortgage programs will continue to operate, though some will slow down or pause until funding is restored.

The best thing you can do is to connect with an expert loan officer who can offer you support and guidance, even amidst the uncertainty of a government shutdown.