Mortgage Rates Are Down (Now What?)

Realtor For Sale Sign

[Photo Credit: Flickr/Diana Parkhouse]

On one hand, the good news with the current government shutdown is that mortgage rates have dropped. You can find a 30-year fixed rate mortgage with an interest rate of 4.22 percent and five-year adjustable mortgages at 3.03 percent.

Unfortunately, the bad news is that with the government shutdown, mortgage loans will be slow to process. The longer the shutdown, the bigger the backlog.

The reason for the delay is that a certain form is needed from the Internal Revenue Service (IRS). This form, known as the 4506-T tax verification transcript, is required by the majority of mortgage lenders. The lenders use this document to verify whether information provided by borrowers is accurate (specifically, tax return information).

Adding to the problem is the fact that lenders also require verification of a borrower’s Social Security number. Both the IRS and the Social Security Administration are affected by the shutdown.

Without these two vital pieces of government verified information, institutions that provide mortgage loans are finding that loan processing is basically impossible. It’s not just banks that are affected — borrowers who are seeking loans through the Federal Housing Administration (FHA) are also impacted. If a buyer needs flood insurance, the shutdown means that the Federal Emergency Management Agency (FEMA) won’t be able to provide that insurance. (Note: FEMA is able to operate for disaster relief and other emergencies.)

Now back to the good news: trends show that most mortgage loans are closed at the end of the month than at any other time, so provided the government shutdown ends soon, the long-term impact on home buying shouldn’t be hugely disruptive.

If you want to learn more about mortgages and the various mortgage loan types, AmOne has information available on the types of mortgages available as well as the top five things you need to know about them. We also have an online calculator available so you can determine how long it will take for you to pay off your mortgage at any given interest rate. Still have questions? Call us toll-free at 1-800-781-5187 to speak with one of our knowledgeable financial search specialists to learn more.

US 30 Year Mortgage Rate Chart

US 30 Year Mortgage Rate data by YCharts