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How to use CryptoCurrency for the Down Payment on a home

How To Use Cryptocurrency For The Down Payment On Your New Home

 

(This blog post was authored by Sarah Kohut,

VP of Mortgage Lending Guaranteed Rate Seattle)

 

The question on many homebuyers’ lips these days is “Can I use cryptocurrency toward the down payment on a new home?”

The short answer is yes, if. Yes, if your lender, bank and/or loan product allow it (many do not). Yes, if it’s liquidated. Yes, if you can properly document the purchase and sale with funds from your bank accounts.

That’s a lot of ifs which means there are a lot of ways things could go sideways if you aren’t prepared. How do you avoid these pitfalls? By knowing the basics.

Find A Loan Officer Experienced In Utilizing Cryptocurrency

Cryptocurrency is new to the mortgage world as it was not an accepted source of funds until late 2017. As a result, the chances of having an underwriter who has never underwritten a loan using cryptocurrency are high. This makes your loan officer’s experience and knowledge of how to document cryptocurrency for underwriting acceptance critical. How do you tell if your loan officer is up to the task?

1. Ask if the lender/bank or loan product accepts liquidated cryptocurrency for down payment, closing costs, etc. If they say they “think”, they do not have the experience you need.

2. Ask your loan officer if they, personally, have ever successfully closed a loan with cryptocurrency. If you need to use your cryptocurrency you don’t want to be someone’s test case.

3. Notify the loan officer that you will be utilizing cryptocurrency for part of your down payment and/or that you have deposited the proceeds from recently sold cryptocurrency in your bank accounts within the last three months. Ask what documentation is required to utilize your cryptocurrency. This will tip you off as to how much your loan officer really knows about using cryptocurrency to buy a home.

 

Get Ready To Document Like Mad

In general, to use cryptocurrency in a mortgage setting you must provide documentation that shows:

  • Money leaving your bank account and moving into your cryptocurrency account (statements and transaction histories from both accounts);

  • Your purchase of the cryptocurrency (statement if available, transaction history, trade confirmation);

  • Your sale of the cryptocurrency (transaction history and trade confirmation); and

  • The proceeds from the sale of the cryptocurrency moving back into your bank account (transaction histories or bank statements from your bank account and the cryptocurrency account).

  • If you transferred cryptocurrency between other cryptocurrency accounts that may need to be traced too.

 

Sounds reasonably simple right? Not really. Underwriters are programmed to match names and account numbers to transactions to verify the account you are listing as an asset is really yours. As most cryptocurrency accounts do not provide documentation containing both your name and an account number documenting cryptocurrency becomes a matter of matching up transaction numbers and other Sherlock Holmes style fun. If you want to avoid a quick denial of your cryptocurrency funds your loan officer needs to be able to create a roadmap for the underwriter of your purchases and sales. So, find an experienced loan officer, download everything your cryptocurrency broker provides and start that paper trail early.

Marcel Deitrich

VP of Mortgage Lending

Guaranteed Rate

972.672.3246

Frisco Texas

Go To the Marcel Deitrich business page HERE

*This article is not intended to give legal advice. If you have legal questions, please consult with an attorney regarding your individual situation.

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