Broker frustrated as homebuyers forced to wait for government to reopen
The government shutdown, which appears to have no end in sight, continues to negatively impact the mortgage industry.
A report released earlier this month stated that $1.6 billion in loan closings were being held up due to the inability to pull flood insurance. And while most other loans that don't require flood insurance aren't affected, a large category of loans is currently in limbo.
Loans backed by the United States Department of Agriculture (USDA) are currently frozen due to the shutdown. These loans help low- and middle-income borrowers buy homes in rural areas. They require no down payment and often appeal to lower-credit borrowers.
One Mississippi broker has seen the impact of the USDA loan freeze firsthand. LeeCoye “LC” Parker, mortgage broker with C2 Financial, said the current freeze is a real challenge in his market.
“What we're seeing with the government shutdown is the inability to fund USDA loans,” Parker told Mortgage Professional America. “USDA loans are the only loan product that requires agency approval, whereas with a VA or an FHA loan, the bank underwriter just underwrites it and moves on. But a USDA loan for rural development, we can't get the final commitment from the agency, because it's closed.”
Hurting rural families
Parker said it’s not just rural buyers hurt by the USDA loan freeze, but also first-time homebuyers.
“That's hurting a lot of rural, first-time homebuyers,” he said. “These young families, we don't have an answer for them because of the shutdown. That's impacting my local market, that's impacting my business. I've probably got at least six deals currently that are tied up due to the USDA not being open.”
Because of the favorable terms, he doesn’t want to use another type of loan as a substitute for the frozen USDA loans. So all he and his customers can do is wait for the government to open.
“If I can go USDA, I am going USDA,” Parker said. “In my personal opinion, second to a VA loan, the USDA loan is the best product out there, as far as the terms and the 100% financing. It comes with a very competitive rate.”
The only question in getting borrowers qualified for USDA mortgage loans is ensuring they meet the requirements, especially the debt-to-income (DTI) ratio. Parker said this has been challenging, especially when rates were a bit higher, combined with rising home prices and insurance costs.
“That goes back to affordability,” Parker said. “I got a lot of people that I do loans for that want 100% financing. If I can do USDA, I'm going to do it. Rates, up until recently, were 7%. Couple that 7% with high Insurance and high home prices, and the debt-to-income for a USDA loan is hard for them to meet.”
Tightening qualifications
Even after the government reopens, the challenges for brokers who use USDA loans and borrowers who rely on them are growing.
The USDA is tightening qualification requirements starting in November. Borrowers who were already struggling to meet DTI requirements might find the loan product completely out of reach. This is a challenge for Parker, who estimated that more than two-thirds of his loans are USDA.
“Effective in the first part of November, they're cranking the front-end debt-to-income ratio down to 29%,” Parker said. “To get higher than 29%, they're going to have over, I think, a 680 credit score, and compensating factors. But again, if I can do USDA, I'm going to do it. I would say probably 70% of my business is USDA.”
While Parker can see why qualification requirements might tighten on a loan product that offers 100% financing, he said it’s just hurting rural families.
“I'm sure it is data-driven, but I think that it's not doing the average American family any favors by tightening it down,” he said. “Now I understand on its face, I understand why the ratios are what they are. It is 100% financing, and if the house appraises for more than the purchase price, you can roll up to 5% of the closing cost into the loan.”
Despite persistent stereotypes, Andrew Gagliano of Gagliano Mortgage said Alabama remains a “hidden gem” offering vibrant cities, good schools, and strong healthcare. He encouraged buyers to experience the state firsthand before forming opinions.https://t.co/s0yHmiuNKd
— Mortgage Professional America Magazine (@MPAMagazineUS) October 20, 2025
At a time when the average age of first-time homebuyers continues to rise, and some potential customers are choosing to remain renters rather than become homebuyers, these higher qualifications continue to shut more people out of the dream of buying a home.
“I understand it, but at the same time, we really have to look at the issue and the basis of the American dream as we all know it, which is buying a home,” Parker said. “The government should be helping, definitely not hindering, and that's what they're doing. I don't know why the USDA is crunching down, and it definitely is going to have a further impact on home affordability.”
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