Can You Use Crypto to Buy a Home

As cryptocurrency continues to gain popularity as an investment vehicle and a means of paying for goods and services, the concept of using crypto to purchase a home has recently come to life. 

It’s important to recognize that not all lenders have the same rules when a borrower wants to use crypto as a down payment. Here’s what you need to be prepared for: 

Non-Agency Lender guidelines can fluctuate as much as cryptocurrency itself

Crypto guidelines and eligibility will vary between lenders. For some mortgage lenders, the current consensus is to avoid crypto when possible. However, this doesn’t mean that using crypto is always completely off the table. 

Borrowers may also encounter the following scenarios: 

• Accounts where any crypto transactions have been recorded are prohibited. 
• The use of crypto is prohibited, but accounts where transactions have been recorded are allowed. Crypto funds are ‘backed out’ and not used in any way towards the home purchase. 
• Some jumbo investors may allow crypto funds to be used directly. However, higher rates should be expected and documentation requirements are strict.

Borrowers should keep in mind that banks require a 2-3 month history of assets. If you plan to liquidate your cryptocurrency within this timeframe to purchase a home, keep in mind that you will need documentation of the money that was used to initially purchase the cryptocurrency. 

Fannie Mae and Freddie Mac’s current cryptocurrency guidelines

As of 2021, Fannie Mae and Freddie Mac allow the use of crypto when specific guidelines have been met:  

• Crypto assets must be liquidated and transferred to an eligible asset account, such as a checking account. The funds must remain within the account for at least two months.
• It must be confirmed that cryptocurrency purchases were made using eligible funds that can be documented through a purchase trail. 
• All bank and investment account statements are required to show (1) when the crypto was initially purchased, (2) crypto balances throughout the ownership period, (3) the value of crypto at the time of liquidation, and (4) proof that the funds derived from liquidation were deposited into a checking account. In December 2021, Freddie Mac released Bulletin 2021-36 to address the use of cryptocurrency. The Bulletin reads that income paid to the borrower in cryptocurrency may not be used to qualify for a mortgage, meaning that cryptocurrency must be converted to dollars if funds are required to be paid at closing, or for reserves. 

 Cryptocurrency may not be included in the calculation of a borrower’s assets, and monthly payments on debts secured by cryptocurrency must be included in the borrower’s debt-to-income ratio. 

As circumstances evolve, it’s important to stay informed on how crypto assets and liquidations affect mortgage qualifications. Guidelines can and will change. Much like how the treatment of restricted stock units have shifted over time, borrowers should expect to see guidelines surrounding cryptocurrency to change as well. 

If you plan on using crypto for a down payment, speak to your lender for confirmation on their specific guidelines.