Can You Buy a Home with Cryptocurrency?

Paying for a sandwich or a video game with virtual money may seem like something out of a sci-fi movie, but you don’t have to wait another century for this to happen. Cryptocurrency is becoming more prevalent than ever, and if you’re one of the 14% of Americans who are investing in it, you may be eager to spend your coins on major purchases, like real estate. If you’ve ever wondered if you can buy a home with cryptocurrency, here’s what you should know.

Can I Buy Property with Cryptocurrency?

The short answer to this question is “yes,” it is possible. Cryptocurrency may not be in physical form, but you can still use it as cash. Making your offer in cryptocurrency could be appealing to certain buyers since it’s akin to making an all-cash offer. However, even though you can buy real estate with crypto, you may encounter hurdles that you wouldn’t otherwise if you were purchasing using more traditional methods.

Challenges

Perhaps the most significant challenge of paying for a new home with cryptocurrency is that its value is very volatile. This volatility may not work out in your favor when you’re ready to go to the closing table, making some sellers hesitant to accept crypto as payment. Some sellers may be open to and even seek out buyers with virtual cash, but others may not. When using crypto as your payment, you can either have a direct transfer of crypto to the selling party or convert it into U.S. dollars. Since finding sellers who are willing to take part in the former method are still relatively rare, it may be more effective to go the second route to buy a home.

To convert crypto for cash, you’ll need to open an account with a reliable and insured cryptocurrency exchange and link it to your bank account and crypto wallet. Then, withdraw your cryptocurrency from your wallet and deposit into your exchange account. You’ll then sell your crypto from your exchange account and transfer it to your connected bank account. Make sure you fully document the conversion, as you will need to show them to your lender for verification. Note that the processing times may vary depending on the exchange service. You may also have to pay a flat fee for exchanging your cryptocurrency.

Things to Consider

Documentation

When applying for a mortgage, you’ll need to provide financial documentation for your income and assets, and cryptocurrency is no exception. Keep a record of your cryptocurrency investments, sales, and exchanges for your lender. For cryptocurrency to be accepted as an asset, Fannie Mae requires it to be converted into U.S. dollars and in an account for at least two months with documentation.              

Taxation

Cryptocurrency is currently considered property by the IRS, not income. Therefore, if you buy (or sell) a home using it, you will incur a capital gains tax. It’s recommended to consult a tax attorney before starting the homebuying process to see how you could be affected.

Laws

It’s necessary to note that as cryptocurrency becomes more ubiquitous, there may be future regulations when it comes to cashing out and performing real estate transactions.

While it’s certainly viable to use cryptocurrency to buy a home, you may encounter difficulties if you’re not prepared for them. If you can, try working with a real estate agent and lender who are experienced with cryptocurrency home sales. Whether you’re in the crypto market for the short or the long-term gains, using your nest egg to buy a home is an excellent way to build a lasting investment.

If you have any questions about the home buying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin t­­he home buying process, click here to get started!

NFM Lending is not a financial advisor or tax consultant. This is not an endorsement of any cryptocurrency or exchange service. You should understand the risks associated with virtual investing and trading before making any financial decisions. NFM Lending does not currently accept cryptocurrency.

These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.