Once Bitcoin, Twice Shy: Can You Buy a Home with Bitcoin?
Let's talk about what this post will NOT cover:
- How bitcoin works.
- Whether or not you should invest in bitcoin.
- Is bitcoin the modern day equivalent of tulip bulbs?
What will we cover?
- Using bitcoin to buy real estate. In other words, can you use bitcoin for your down payment?
- What will a mortgage lender ask for if you obtain a loan for your purchase?
- What else do I need to know before I cash out of the investment that's kept me sleepless for the last few months?
Using Bitcoin to Buy a House
In short and in summary, a number of our jumbo investors WILL allow bitcoin to be used for the down payment and closing costs so long as the source of the bitcoin asset can be acceptably documented. This typically translates to "paper trailing" the statement from the bitcoin account or "wallet," then seeing the sale evidence itself. We will require that the bitcoin funds have been liquidated and transferred into a cash-equivalent account. There is an important distinction here. Bitcoin funds will, at the time of this writing, almost universally not be allowed for the other requirements of attaining a loan, such as asset reserves. What I'm witnessing is that bitcoin is permissible as a source of cash-equivalent funds once it has been sold. But as an "asset" itself, mortgage lenders will not accept it like stocks, bonds or retirement accounts when considered for the loan's reserve requirement. Let's look at an example:
Our borrower has an investment portfolio with $500K of a publicly traded stock in it. He will liquidate $300K for his down payment and would then have $200K in reserve. We would "discount" the $200K to 70% of its market value, or $140K. This borrower has $140K in reserve by way of that same account.
Now let's say that instead of stock, our same borrower has a bitcoin account worth $500K (but check back in five minutes --- this could change...). If he liquidates $300K and has $200K in the account, we will not count any of that remainder towards reserve.
As a mortgage lender here in the San Francisco Bay Area of California, I can attest to the fact that questions about bitcoin are becoming more frequent. Some lenders, including those who make jumbo loans, will not allow any use of bitcoin. If you're planning to buy a home and need guidance on this specific aspect of the purchase process, don't hesitate to get in touch.
Mine your own business,
Robert J. Spinosa
Vice President of Mortgage Lending
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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