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Can You Pay the Down Payment With a Credit Card?

There are many reasons why someone would want to make a down payment on the house with their credit card. Perhaps you saw a house you like and don’t want to miss the opportunity to purchase, but you don’t have enough money for a down payment? One of the solutions may be in credit cards, but is this possible?

The answer is no. You can not pay a down payment with your credit card. Lenders usually don’t allow this option, and money must be in your account for a certain amount of time, depending on the lender.

Master Credit card

Still, there are other options you can explore and some workarounds you can try out, but the real question is whether this is a good idea.

Can You Use Money From Credit Cards to Make a Down Payment?

To be even more specific, there is no option at any lender where you can go and give your credit card to pay for a down payment. When applying for a mortgage, you need to leave 20% of the house price as part of your closing costs. This amount is usually a lot higher than any personal loan you can take. There are other ways you can finance a down payment, but most lenders will not take credit cards as an option.

You Can Use the Cash Advance Option or Cash Apps

So even though lenders will not take credit cards directly from you, you can withdraw the money from your credit card and place it in your account. The money must be in your account for at least 60 days, even though some lenders require a longer period. Here are the options you can go with.

ProcedureDrawbacks
Cash advanceYou can either withdraw money from an ATM and place it in your account or take a loan against your card’s cash advance limit.The fees are between 3 – 5%, and the amount is usually not big enough to cover the whole down payment.
Cash appsYou can use some of the cash applications and send money to some of your family members and then ask them to send that money to you.There is a limitation on how much money you can send on a daily and monthly basis. And the fees are also high.

Why Using a Credit Card for Down Payment Is a Bad Idea?

If you read some of the best mortgage books or ask your mortgage broker, they will advise you not to take personal loans to finance your down payment. As you know, the mortgage is a lien, and if you take high credits you can not repay, you may lose the house. Also, you will have other expenditures like closing costs or life insurance for a mortgage that you usually can not pay with a credit card either. However, there is a possibility you will be able to pay for mortgage insurance, inspection, or appraisal, but this depends on the lender.  

Your Credit Score Will Go Down

Another reason why you shouldn’t take a credit card to finance your down payment is that this will affect your credit score. Even though the mortgage is good for your credit score, in order to get approved for a mortgage, you must have a credit score that is 670 or higher. Once you take a personal loan or credit score, your debt-to-income ratio will change, and this will affect your credit score. The higher the debt you have as opposed to the income, the lower the score will be.

It can happen that your score goes down if you take credit in the amount of your down payment.

 Woman paying with credit card

Other Options to Explore

Before you decide whether paying a down payment with a credit card is a good idea, it would be advisable for you to explore other options. So if you are short on money and don’t have enough to cover the 20% down payment, look for lenders that offer low down payment. You can also apply for FHA loans. For example, Rocket Mortgage does FHA loans, and you will have to pay 3.5% for a down payment on the house purchase price. Another option is to find someone to cosign the mortgage with you. This way, you will share the monthly payments with that person, and your score will be better overall which will leave the option for you to get personal loans and pay for a down payment.

Couple looking at documents

Should You Pay the Down Payment With a Credit Card?

As you can see, technically, you can use a credit card to put a down payment on your house. But you will pay a lot of fees for money withdrawn, and you will have to pay off both the personal loan and mortgage on a monthly basis. The best course of action is to find a good mortgage broker to help you do the math and calculate how much you will have to pay each month. Also, before you decide to take this step, make sure you cover and explore other options as well. There are many lenders that will be able to help you out and allow you to purchase a home with low down payments or none at all. So before you go into any further debts, make sure you have covered all the options and if any of these options are not good for you, then consider taking a credit card to make a purchase.