Can you buy a house with Bitcoin? Turning cryptocurrency into a down payment on a home is becoming more common. Here's how it works.
Cryptocurrency was once a shadowy concept, a futuristic-sounding idea that was largely the domain of blockchain technology enthusiasts and early adopters. But as cryptocurrencies – Bitcoin in particular – saw soaring prices in recent years, the idea of owning digital currency became more mainstream.
Now, Bitcoin investors may be wondering: Can you buy a house with Bitcoin? The answer is yes – and no.
You can’t buy a house with Bitcoin itself, at least not if you’re taking a loan with a traditional mortgage lender. But you can sell some or all of your bitcoin and use the proceeds to purchase a home.
Can you buy a house with Bitcoin? And should you?
You can buy a house with the proceeds you receive from selling your bitcoin. If you have a significant amount of Bitcoin in a digital wallet, you can sell it for USD, and put the USD toward the home.
“Bitcoin can be used for your down payment,” affirms Jodalee Tevault, a senior mortgage consultant with Fairway Independent Mortgage Corporation in Chandler, Ariz. (Fairway owns Home.com.)
“There is a little more work involved when it comes to using Bitcoin, as it would have to be converted to U.S. dollars and deposited it an eligible asset account before closing,” she says. “But it’s very doable and becoming more and more common.”
You cannot use Bitcoin in its crypto form to purchase a home with a traditional mortgage lender. If a seller is willing to accept Bitcoin, you would need to arrange the payment and any financing details directly with them. At this time, traditional mortgage lenders in the U.S. do not accept cryptocurrency for down payments, closing costs, or monthly mortgage payments.
“It’s very doable and becoming more and more common.”
Jodalee Tevault, senior mortgage consultant
Should you buy a house with Bitcoin?
Should you buy a house with Bitcoin? It’s really up to you. Using your Bitcoin earnings to buy a house is less complicated than you might think, and we’ll explain how to do it below.
Whether it’s your best option depends on how you view your assets and goals. If your chief priority is to buy a home, then selling some of your bitcoin for a down payment might make sense.
But if you expect Bitcoin to skyrocket in price in a few years, you might be more comfortable holding on to what you have and using other funds toward your down payment.
Bitcoin is notoriously volatile. It’s had upward swings that outperformed many early investors’ expectations, but it can also drop quickly as well. Only you can determine your appetite for riding out Bitcoin’s fluctuations, and whether selling it has a place in your homebuying plans.
This is where a financial advisor can help. They can create a strategy and recommendations based on the types of assets you have and what you’re trying to achieve.
If you are considering using Bitcoin to buy a house, read on. We’ll tell you exactly what you need to know to make it happen.
How to buy a house with Bitcoin: A step-by-step guide
Buying a house with cryptocurrency earnings is gaining popularity. In late 2021, 11.6% of first-time homebuyers reported selling cryptocurrency investments to pay for their down payments. That number jumped from 4.6% in 2019 and 8.8% in 2020.
Generally speaking, using Bitcoin earnings to buy a house is similar to using the sale of any other asset, such as a boat or car. But there are a few extra steps to be aware of before you decide to sell.
1. Plan in advance
Buying a house requires a lot of planning — buying one with Bitcoin especially so.
If you plan to sell Bitcoin for your down payment, you should complete the sale at least two weeks prior to your closing date. The two-week timeline allows for possible delays in funds being transferred from the exchange on which you sell the Bitcoin to your U.S. bank account. Note that U.S. lenders require any funds used toward a home purchase to be in USD.
The Bitcoin must have been in your crypto wallet for at least 60 days prior to the sale. Your lender will ask for proof of this before they will approve the loan.
Planning ahead will also help you anticipate any potential costs associated with converting your Bitcoin to cash. You may be charged an exchange fee for the conversion, as well as a transfer fee, depending on the exchange you use. Though the fees may be small compared with a home purchase, it’s smart to budget for all of your homebuying-related costs.
2. Talk to your financial advisor about the tax implications
Selling any asset for a profit could have tax implications, and that includes virtual currencies. Before selling Bitcoin for your down payment, consult your financial advisor about your tax obligations and whether you’ll owe capital gains tax on the sale.
If you do, that’s not necessarily a reason not to use crypto earnings toward a home. But your tax advisor can help you minimize the impact and figure out the smartest financial path toward homeownership based on your situation.
3. Prepare for price fluctuations
You’ll also want to consider the value of your Bitcoin. Because Bitcoin’s price can fluctuate significantly, make sure that when you sell, you will have enough for your down payment. If you can afford your down payment by selling at today’s price, you may not want to wait to initiate the sale.
Certainly, the value might increase, and you might regret not waiting to sell and getting a higher profit. But if you wait to sell and the value drops, you may not make enough on the sale to cover your down payment and closing costs.
Again, the decision here is yours. A lender cannot tell you what to do with your investments. But it’s worth keeping price fluctuations in mind when deciding when to sell, if you plan to use the funds for your down payment.
4. Sell your Bitcoin and keep a paper trail
Here comes the fun part — getting your cash. Confirm with your lender to see exactly how much money you’ll need to close, including your down payment and closing costs.
Keep a record of each transaction in the sale. Your lender needs to document the source of any funds used to purchase a home. Download records showing the Bitcoin in your crypto wallet, the record of the sale, and save PDFs of the money hitting your bank account. Organize any receipts or documents you receive from the crypto wallet or exchange you use.
Your wallet account should have records of your transaction history that you can provide to your lender’s underwriting team.
By law, lenders have to document any large deposits in a homebuyer’s bank account. This is to prevent money laundering and other illegal activities. A large deposit is typically any single amount that is greater than 50% of your monthly income. If you make $4,000 a month, your lender will need to document any deposits above $2,000.
“The way to use it is to sell it and transfer to your checking or savings account and let it season in that account for 60 days. Then it’s a smooth and easy process for you and your loan approval.”
Dan Chapman, mortgage advisor
Here is the exception to the large deposit rule: If the money has been in your bank account for longer than two months, it’s considered “seasoned,” and the lender does not have to document the source. It’s best, though, to make sure the large deposit doesn’t show up on the statements. If the deposit was made 61 day ago, your most recent statements may show it. Get bank statements that contain 60 days of history but do not show the large deposit. This makes your and the lender’s job much easier.
If you sell Bitcoin now but you don’t end up purchasing a home for another three or four months, you won’t need to document the sale. But if you sell within the two months before your closing date, you will need to provide the ownership and transaction records.
“The way to use it is to sell it and transfer to your checking or savings account and let it season in that account for 60 days,” says Dan Chapman, a mortgage advisor with Fairway. “Then it’s a smooth and easy process for you and your loan approval, so just plan ahead a bit.”
Can you buy a house with Bitcoin? FAQs
Can you use Bitcoin to buy a house? You can use your earnings from Bitcoin to buy a home, but you cannot use the cryptocurrency itself if you are taking out a mortgage through a traditional lender. You will need to convert the bitcoin into USD and have the funds in your bank account prior to your closing date. The Bitcoin must have been in your crypto wallet for at least 60 days before it was sold. You will need to provide transaction and ownership records for your Bitcoin assets to your lender.
Can you turn Bitcoin into cash? You can turn Bitcoin into cash by selling it on a cryptocurrency exchange. Once the sale is complete, you will receive the proceeds in your designated bank account.
One asset to another
Selling assets – including cryptocurrency, boats, stocks, and other property – to purchase a home is common. The only difference with Bitcoin and other cryptos, such as Dogecoin and Ethereum, is that you’re selling the asset on an exchange. The documentation standards are the same. That means that you can buy a house with Bitcoin, and it’s probably easier to do than you think.