No, you cannot use a credit card for a down payment on a house. Home sellers and lenders do not accept credit card payments directly. Mortgage lenders require that the money must be in your personal banking account for 30-90 days before you can accept an offer. Besides, credit card limits generally are not high enough to accommodate a down payment on a house.
Even if you could use a credit card for a down payment on a house, it is not a good idea. It would almost certainly result in highcredit utilizationand an increase in your debt-to-income ratio. That may affect your credit score right when you’re applying for a mortgage. As a result, you could get approved with a higher APR for your new mortgage, or it could even cause your mortgage application to be rejected.
Alternative Ways of Using a Credit Card for a Down Payment on a House
If you really want to use a credit card for a down payment on a house, you could potentially do so in a very roundabout way. For example, apps like Venmo make it possible to move money from a credit card to a friend’s bank account. Then, your friend could transfer the funds to your bank account to get seasoned for a down payment on a house. However, there are fees and daily limits to contend with.
The other method is to take out a cash advance, which is very expensive and won’t give you much spending power. A credit card’s cash advance limit is usually just a fraction of your overall limit, after all.
Things to Know Before Using a Credit Card for a Down Payment on a House
- Ineligible payment methods: Major lenders do not accept down payments via credit cards or third-party money-sharing apps.
- Seasoning requirements: Mortgage lenders typically require down payment funds to spend 30-90 days in a bank account to get “seasoned”. Sixty days is most common. Just note that some exceptions may apply.
- Alternative ways of paying with a credit card: You could do a cash advance for a down payment on a house, usually through an ATM withdrawal or a convenience check. But it’s not a good idea due to the high fees and APRs that might apply. Interest also starts accruing immediately, with no grace period.
Abalance transfer credit card, on the other hand,won’t help you make your down payment, but it could save you some money after the fact. You’ll have to take out your mortgage first, then transfer part of that balance to a credit card with a 0% balance transfer APR and a low transfer fee.
In the end, using a credit card for the down payment on a house isn’t the best idea, if it’s even possible. You won’t be able to pay most official closing costs with a credit card, either. But there’s usually a wide range of expenses associated with moving into a new home, and you can charge many of them to a credit card. They may include things like inspections and appraisals, for example.
This answer was last updated on 05/12/23 and it was first published on 04/23/18. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
No, you cannot use a credit card for a down payment on a house.
Is it okay to use your credit card when buying a house? ›
While you're waiting to close on a home, you can still use your credit card, but it's best to only use it for small purchases and pay off the balance in full. Do not make large purchases you cannot afford to pay off that'll leave you carrying a significant balance from month to month.
Do mortgage lenders look at credit card spending? ›
Mortgage lenders will often look at your spending habits to determine if you are a responsible borrower. They will look at things like how much you spend on credit cards, how much you spend on groceries, and how much you spend on entertainment.
Do mortgage lenders look at credit card utilization? ›
High credit utilization can make you look overleveraged (too much debt). Let's say you have a credit card with a limit of $15,000. In this case, lenders would prefer to see an available credit of $10,500. If your credit utilization rate is high, it's best to work down your debt before you apply (when possible).
What credit score do you need to put a down payment on a house? ›
Look for lenders that offer FHA loans. Many lenders will accept a 500 credit score if you can make a down payment of 10%. If you have at least a 580, you can typically put down just 3.5%.
Can you use a credit card for FHA down payment? ›
Some borrowers may assume that if they simply provide the money, no questions will be asked. But this isn't the case-FHA down payment funds must come from approved sources. For example, payday loans or other “non-collateralized” loans such as credit card cash advances must not be used to provide down payment money.
Why can't you use a credit card for mortgage? ›
In general, mortgage companies and mortgage loan servicers do not accept credit cards as a form of payment. That's in large part because credit card companies charge merchants processing fees that mortgage companies aren't willing to pay.
Can I put a house payment on a credit card? ›
Bottom line. Since lenders typically don't accept credit cards, you can usually only make a mortgage payment on your card via a third-party platform. Paying one debt by adding to another is a risky maneuver, however, and you should only consider it if you can afford to cover the payment in full.
How long should you have a credit card before buying a house? ›
After understanding what we have discussed above, you probably will want to hold off from applying for a new credit card within the six months before applying for a mortgage, since in that period your score may still be lower as an effect from the new credit card.
What should you not tell a mortgage lender? ›
You don't want to tell the mortgage lender that the house is in disrepair. You also don't want to suggest you don't know where your down payment money is coming from. Finally, don't give your lender reason to worry if your income will stay stable.
Lenders look not only at your credit score but also at your debt-to-income ratio, which includes the payments on your credit cards. So improper use of your credit cards could make it harder to get approved for a mortgage.
How much credit card debt is okay when buying a home? ›
You typically need to stay below 28 percent to be approved. The back-end ratio takes your total debt payment into consideration, including your credit card payment. You should aim to stay below 36 percent.
Should I pay off my credit cards before applying for a mortgage? ›
Paying off your credit cards prior to applying for any home mortgage loan is always a good idea, however it's very common that a borrower will learn in the middle of the loan processing that they may need to lower their debt-to-income ratio in order to better qualify for the mortgage loan.
What should your credit usage be when buying a house? ›
You'll typically need a credit score of 620 to finance a home purchase.
Can you use a credit card to make a house payment? ›
Lenders don't typically accept mortgage payments by credit card because they would have to pay a credit card transaction fee, which can be as high as 3.5%. You'd also be paying a secured debt with an unsecured debt, possibly with a higher interest rate.
Can you borrow money to use as a down payment on a house? ›
Key Takeaways: If you already own a home, the most common way to borrow money for a down payment is with a home equity loan or a HELOC. Other options include 401(k) loans, bridge loans, or accepting a cash gift from family or friends. Most lenders won't allow you to use a personal loan.
Can you use a credit card to pay down a loan? ›
While it's possible to pay a loan with a credit card, it will almost always cost you to do so. That cost usually comes in the form of transaction fees and higher interest rates.
Can you use credit card for down payment on investment property? ›
Credit cards can be used for down payments or rehab loans, though not directly. A strategy involves either using a cash advance against your credit line or bringing on a third-party company that runs your credit card for a purchase and wires money from that purchase to a title company.
