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 typically require down-payment funds to spend at least 60 days in a bank account to get “seasoned.” Besides, credit card limits generally are not high enough to accommodate a down payment for 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 high credit utilization and an increase in your debt-to-income ratio. That could cause a drop in your credit score right when you’re applying for a mortgage, which could in turn cost you thousands of dollars over the life of the home loan if the lower score results in a higher APR. It could also cause your mortgage application to be rejected.
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, and your friend could then transfer the funds to your bank account to get seasoned for a down payment on a house. But 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 usually is a lot lower than its purchase limit, after all.
Here’s why you shouldn’t use a credit card for a down payment on a house:
- Major lenders do not accept down payments via credit cards or third-party money-sharing apps.
- Mortgage lenders typically require down payment funds to spend 30-90 days in a bank account to get “seasoned.” Sixty days is most common.
- Fannie Mae underwriting standards require at least two months of deposit-account history to verify cash used as a down payment. In unusual circumstances, such as through Fannie Mae’s HomeReady program, “cash-on-hand” can be used without “seasoning.”
- You could do a cash advance, via either an ATM withdrawal or a convenience check, to use for a down payment. But that’s too expensive to make sense. Cash advances come with 3%-5% fees and high interest rates (over 20%). Interest also starts accruing immediately, with no grace period.
- A balance transfer credit card 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.