Using Cryptocurrency for a Down Payment

Cryptocurrency, like Bitcoin, CAN be used for funds for closing on a home as long as the cryptocurrency (i.e. virtual currency) meets certain criteria. Fannie Mae and Freddie Mac require that the funds be exchanged into U.S. dollars and that held in a U.S. regulated financial institution. In order to use conventional financing, there needs to be enough documentation to meet conventional guidelines, including:

• documentation from cryptocurrency exchange account verifying the borrower as the legal owner and not the nickname of the account, that borrower has owned the cryptocurrency for at least two months, AND
• previous bank statement from the borrower showing funds going into the same cryptocurrency exchange account, OR 1099-B/MISC from the same cryptocurrency exchange account plus the borrower’s tax returns reflecting the 1099 gain/loss.

The cryptocurrency can be used for the down payment and for the closing cost, reserves and prepaids. It cannot be used for the earnest money deposit.

It’s also important to note that lenders will typically require two months bank (or asset account) statements. In addition, if you’re self-employed, lenders will require 3 months bank statements from your business bank account. Lenders are going to want to see that the funds used to purchase the cryptocurrency were not borrowed (ex. purchased with a credit card or other financing).

If you’re planning on using a government loan, such as FHA, then the cryptocurrency will need to be “seasoned” in an eligible US bank account for over 60 days. Lenders will need two months bank statements that do not reflect the deposit of the funds.

Bottom line, documentation is key with being able to use cryptocurrency to buy a home when you’re also using a traditional mortgage. If you’re considering buying a home, with or without using cryptocurrency, it’s important to start the preapproval process as soon as possible to learn what your options are. If you’re wanting to buy or refinance a home located anywhere in Washington state, I’m happy to help you!