May
19
,
2021
The rise of cryptocurrency has brought with it many questions for American consumers. What can you buy with Bitcoin? How do you cash it in? What does it mean to own Ethereum or other cryptocurrency? And for some house hunters who are invested in cryptocurrencies, can you buy a home with Bitcoin or other virtual cash?
The answer to the real estate question depends greatly on the nature of the transaction you seek. A private arrangement between a seller and a buyer involving Bitcoin may be possible if all parties can agree.
But what happens if you have a situation where a buyer wants to use Bitcoin or other virtual currencies to make a down payment on an FHA home loan? Or accept a down payment gift that is in the form of Bitcoin or sourced from Bitcoin holdings?
Using Bitcoin to Make a Mortgage Loan Down Payment
The shortest answer, at least where FHA mortgages including One-Time Close construction loans are concerned, is that you cannot use Bitcoin, Ethereum, or other virtual currency to make a down payment on your home loan.
It is not considered cash, and trying to make a down payment using Bitcoin would be the same as trying to make your down payment using diamonds or precious metals. The reception at your participating lender would be the same--these would not be accepted.
The Internal Revenue Service does not view Bitcoin as currency, but rather as assets. The official site for the IRS also reminds consumers, “The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, or holding virtual currencies as an investment, generally has tax consequences that could result in tax liability.”
Converting Virtual Currency to Cash
FHA borrowers interested in using virtual currency to make a home loan down payment may wonder why we don’t simply advise borrowers to convert crypto to cash for the down payment. But your lender’s requirements include sourcing your down payment funds to make sure that money does not come from unapproved sources like a pink slip loan or credit card cash advance.
It MIGHT be possible, depending on the lender, to convert cryptocurrency to cash and use it with your down payment. That said, your funds may be subject to certain requirements. Some lenders may require you to keep that money in an escrow account for a minimum “seasoning period” before you can use it to make a down payment, and you will need to ask the lender about documentation requirements for crypto-sourced down payment funds.
The lender may or may not permit you to use converted crypto funds. It’s best to ask ahead of time to make sure you understand the down payment requirements that may apply.
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Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
FAQs
You can't actually use crypto itself in exchange for real estate, nor can you use it to take out a mortgage or put a down payment on a home. Crypto is volatile, and lenders see it as part of the same category as other non-cash assets like precious metals, stock shares, or valuable goods.
Can you use crypto currency on an FHA loan? ›
The Bulletin reads that income paid to the borrower in cryptocurrency may not be used to qualify for a mortgage. Cryptocurrency may not be included in the calculation of a borrower's assets, and monthly payments on debts secured by cryptocurrency must be included in the borrower's debt-to-income ratio.
How do I avoid a downpayment on my FHA loan? ›
Can I get an FHA loan with no down payment? No. FHA loans require at least 3.5% down for borrowers with credit scores of 580 or higher, and a 10% down payment from borrowers with scores between 500-579. The USDA and VA loan programs offer 0% down payment mortgages, but you must meet the eligibility requirements.
What is the acceptable source of down payment for FHA? ›
FHA will accept cash from savings and checking accounts, cash saved at home, private savings club finds and other types of accounts. Other types of funds are also allowed, including savings bonds, IRAs and 401K accounts, investments, gift funds, and the money from the sale of personal property.
Can you purchase a home with cryptocurrency? ›
Several cryptocurrency payment processors allow you to pay your mortgage directly with crypto. These processors typically convert your crypto to fiat currency before sending it to your mortgage lender. What housebuyers need to buy a house with digital assets is a cryptocurrency-backed mortgage.
Can crypto stop you getting a mortgage? ›
It's free & doesn't effect your credit score.
However, investing in crypto may affect your mortgage application since it's still considered risky, and mortgage lenders are concerned about anonymity.
Can I pay my mortgage with crypto? ›
With BitPay Bill Pay, thousands of businesses and banks, including mortgage lenders, are able to accept direct crypto payments using any token or coin BitPay supports, including Bitcoin (BTC), Bitcoin on the Lightning Network, Ethereum (ETH), Bitcoin Cash (BCH), Dogecoin (DOGE), Shiba Inu (SHIB), Litecoin (LTC), ...
How do you prove the source of a down payment? ›
The quickest and easiest way to document funds in your bank account is to provide your lender with copies of your most recent bank statements. Most lenders request two months of bank statements, but some still ask for three.
Why is my FHA down payment so high? ›
FICO Scores and Down Payment Requirements
Those who have marginal FICO scores are required to make a 10% down payment. According to FHA home loan minimum standards, those with FICO scores between 500 and 579 are required to come up with this higher down payment.
Can cash on hand be used for an FHA loan down payment? ›
Cash-on-hand is not an acceptable source of funds for the down payment or closing costs. For HomeReady mortgages, cash-on-hand may be considered an acceptable source of funds for the down payment and closing cost.
The good news is that it is possible to use your cryptocurrency such as Bitcoin as a deposit for a mortgage. However, you'll need to convert it to standard currency before it will be accepted, and even then not all mortgage lenders will be happy to accept it as a source of deposit.
Can I use bitcoin for a down payment on a house? ›
You can't actually use crypto itself in exchange for real estate, nor can you use it to take out a mortgage or put a down payment on a home. Crypto is volatile, and lenders see it as part of the same category as other non-cash assets like precious metals, stock shares, or valuable goods.
Can I borrow crypto to buy a house? ›
Instead of selling your crypto, you can use it as collateral to qualify and secure a mortgage to purchase a home.
Can you use crypto as a down payment on a house? ›
You can't actually use crypto itself in exchange for real estate, nor can you use it to take out a mortgage or put a down payment on a home. Crypto is volatile, and lenders see it as part of the same category as other non-cash assets like precious metals, stock shares, or valuable goods.
Can you use crypto as collateral for mortgage? ›
Crypto-backed mortgages involve using cryptocurrency holdings as security against a homeowner loan. The idea of using digital assets as collateral against traditional loan products such as mortgages has gained traction as the value in the crypto markets has grown over recent years.
Can I use my crypto to get a loan? ›
A crypto loan is a loan issued by a crypto lending platform. When you take out a crypto loan, your cryptocurrency is used as collateral — just as your house or car would be used as collateral for a mortgage loan or auto loan. And like a traditional loan, crypto loans are paid off with interest over a set time.
Do crypto loans count as income? ›
While selling your cryptocurrency is a taxable event, taking out a crypto-backed loan is typically tax-free. In this guide, we'll break down everything you need to know about how crypto loans are taxed.
