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If you have Bitcoin or other cryptos, you might be wondering: Can I use cryptocurrency to buy a home?
Buying real estate can be difficult, even if you’ve conquered the mortgage closing timeline. And the truth is that adding cryptocurrency into the mix can complicate things a little further.
In this post, we’ll break down what you need to know when it comes to using cryptocurrency to buy a home. We’ll cover:
- How cryptocurrency works
- How to use crypto toward a home purchase
- The steps to take when buying a home with crypto
What is cryptocurrency, and how does it work?
Cryptocurrency, the most popular being Bitcoin and Ethereum, is basically digital money. The main way that it differs from ‘regular’ currency like the Dollar or the Euro, is that cryptocurrency is decentralized. This means that there’s no central bank or government entity that manages its value; this is instead something that’s done by the currency’s internet users.
Crypto is a way of solving the problems that come with sending money to people online and across the world. Because it’s decentralized, anyone who owns it can convert it to Dollars, Euros, Yen, or most other local currencies throughout the world. Though it’s becoming more widely used and accepted as payment for goods, it’s mostly purchased as an asset similar to stocks.
It’s difficult not to become intrigued by the financial value that crypto can bring. After all, Bitcoin recently hit a high of more than $68,000, which means that if you invested early on (or even a year ago), you could be sitting on quite a sum of money.
So, can you use it to buy a home?
Yes, you can use cryptocurrency to buy a home
But there’s a catch. 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. If you own any of these things and you want to use them for real estate purchases, there’s one important step you need to take: convert them to cash.
Crypto is no different. You need to cash it out first, and then you can put the money toward your down payment or property purchase.
But there’s another catch: timing. Lenders see sudden large deposits as red flags. If you plan to use cryptocurrency as a down payment or to help qualify for a mortgage, you need to convert it to cash at least two months before you wish to use it. This is called the ‘seasoning’ period, which is the time your underwriters look at to verify how long your crypto assets were in your digital account before you cashed them out.
Keep in mind that the process can vary depending on which lender you choose. The good news is MBA Mortgage can help you find the right lender who can help you use cryptocurrency to buy a home. That’s why we put together these steps that can help you start your home buying journey and use crypto to the best of your advantage.
How to use cryptocurrency to buy a home
Make a plan well in advance
If you’re using cryptocurrency for a down payment or closing costs, don’t cash out at the last minute. Large deposits raise red flags in a lender’s eyes, which can stall your mortgage application by requiring lots of additional paperwork. Some lenders may even disqualify you since sudden deposits can seem too risky.
It’s important to start cashing out your crypto assets months in advance of when you plan to use them. With the money sitting in your account for several months, you don’t need to provide your lender with an exhaustive paper trail, and your application can continue smoothly.
Keep your eye on volatility
Remember that cryptocurrency is a volatile asset, meaning its value can fluctuate wildly. You could see a steady increase that gives you a false sense of confidence, only to be left high and dry by a sudden downturn in value. For example, suppose you own $100,000 worth of Bitcoin (at $50,000 each), and your home buying plan hinges on you putting $100,000 as your down payment. What if Bitcoin’s value suddenly dropped $5,000 or $10,000? You’re suddenly short by a lot of money, meaning you can no longer afford to buy a home.
This goes in hand with the first point. Keep your eye on volatility, and make sure you sell your crypto assets while they’re still valuable enough to cover your purchase costs.
Like other assets, crypto requires a paper trail. Make sure that you keep adequate documentation that you can show your lender. This includes providing records of the sale, along with bank statements that show where the money was deposited from and when. Doing so will help your lender’s underwriting team streamline the verification process and get you on your way to a successful mortgage application.
Get even more help buying a home
Download our free guide, Things to Consider When Buying a Home, and you’ll get expert insights into today’s real estate market. You’ll see the financial and non-financial benefits of homeownership, and answers to common questions you might be wondering about.
Let us help you buy a home with cryptocurrency
It can be difficult to buy a home with crypto, but MBA Mortgage is here to make it simple. Whether you’re looking to use your digital assets to fund a down payment or closing costs, get in touch and we’ll connect you with the right lender.