Investing in cryptocurrencies is all the hype these days. Even celebrities like Mike Tyson are inquiring on Twitter about whether Solana or Ethereum is the better bet.
Solana in particular has garnered attention among crypto enthusiasts, especially among blockchain infrastructure companies that find its blockchain technology secure, fast, and full of potential.
But what if you’re a homebuyer who has purchased Solana and now wants to purchase that most tangible asset – a property? Can you buy a house with Solana? The answer is yes – if you convert it to cash.
We’ll explain how Solana might fit into your homebuying plans.
What's in this Article?
Unlike Bitcoin, Solana has yet to become mainstream. So most people who know of Solana follow the crypto world and the fluctuations of the different coins and blockchain-based currencies.
For the uninitiated, Solana is reportedly the fastest blockchain platform to date. Its public, open-source nature supports smart contracts, thus making it popular in the NFT and decentralized finance (DeFi) spaces.
Its infrastructure is faster than Ethereum and uses less energy than other crypto platforms, while also allowing for faster processing speeds and cheaper transactions.
That’s a big deal, because one of the criticisms leveled at crypto mining is that it’s harmful for the environment, due to the computing power it demands. A more energy-efficient platform will likely be crucial to crypto’s more widespread adoption.
Yes, you can buy a house with Solana – but you’ll have to convert it to cash first if you plan to use a traditional mortgage.
At this point, mortgage lenders do not allow borrowers to pay their down payment and closing costs with cryptocurrencies. Those funds must be paid with U.S. dollars.
Digital real estate companies are cropping up, especially with the growing buzz around the metaverse. And individual sellers may be willing to accept Solana as payment for their house.
But if you plan to take out a mortgage, you’ll need to complete the transaction with USD.
Additionally, you will need to make your monthly mortgage payments in USD as well.
There may come a time when lenders accept cryptocurrencies such as Solana for mortgage payments. But right now, cryptocurrencies are still considered volatile and they’re much less regulated than fiat (government-backed) currency.
Therefore, the majority of mortgage lenders will likely require transactions to be complete in USD for the foreseeable future.
How do you buy a house with Solana?
In order to buy a house with Solana, you’ll need to sell it first and then use the cash toward your down payment and closing costs.
Here’s what to know about the process.
When deciding when to sell Solana, keep your homebuying timeline in mind. You’ll need the sale proceeds in your U.S. bank account before you can close on the home. It’s a good idea to sell the Solana at least two weeks prior to your closing. That leaves enough time for the transaction to go through and the funds to reach your account.
Be aware of volatility, though. If the price of Solana drops just before you sell, you may not earn enough in the sale to cover your down payment. You’ll then have to make up the difference from your savings or other assets, or you may have to cancel the sale.
When you sell is entirely up to you. But if the price reaches a point at which you know you’d have enough to cover your homebuying costs, you may want to sell then to be on the safe side. Alternatively, you might opt to wait to see if the price increases.
If you have a financial advisor, they can consult with you on when it might be best to sell.
Another note on timing: If you sell Solana within 60 days prior to your closing, your lender will likely classify the proceeds as a “large deposit.” You’ll have to provide documentation of ownership and of the sale to prove that the transaction was legitimate.
However, if you sell Solana more than 60 days prior to buying the house, the money in your account will be considered “seasoned.” Funds that are older than 60 days do not require documentation. Selling earlier – if you determine that’s the best course for you – could relieve you of some homebuying paperwork.
Assuming that you sell your Solana within 60 days prior to your closing, make sure to keep a paper trail.
Your lender will need to see:
- Proof that you owned the Solana for at least 60 days before you sold it
- A record of the sale
- A bank statement showing the transaction in your account
You should be able to obtain proof of ownership and of the sale from the wallet or crypto exchange you use.
Note that the 60-day ownership period is different than the 60-day documentation requirement:
In order for the funds to be eligible for use toward your down payment and closing costs, you must:
- Have owned the Solana you sold for at least 60 days before selling it, and
- If you sell within 60 days prior to your closing, you must provide proof of ownership and documentation of the sale
If that seems confusing, don’t worry. Your mortgage lender can walk you through all of the requirements and timelines.
Using crypto to buy a house is a relatively new phenomenon, but it’s catching on. In fact, a recent study showed that 1 in 9 homebuyers now uses crypto toward their downpayment. You can use the proceeds of a crypto sale the same way you would any other asset. The key is providing paperwork to document the sale.
The best thing to do if you plan to use Solana to buy a home is to communicate early with your lender. Let them know you have crypto assets you’d like to use toward your upfront costs, and ask them what the guidelines are.
They can tell you exactly which documents you need and how best to keep the purchase of the home on track.
|Supplement your savings with crypto earnings for your down payment and closing costs||You must convert Solana to USD to use it toward buying a house with a mortgage|
|Crypto assets are allowed to be used alongside other asset sales, such as a car or boat||You may end up selling sooner than you may have wanted to avoid being short on down payment funds|
|No sale documentation needed if you sell more than 60 days prior to buying the house||You must have owned the Solana 60 days prior to selling in order to use the sale proceeds toward your house, if you’re taking out a mortgage|
Crypto investors and enthusiasts will debate the merits of Bitcoin vs Ethereum vs Solana as investments and technology platforms.
But what about homebuyers? Is one of these a better option if you plan to use crypto to buy a house?
After all, Bitcoin is the original cryptocurrency, with the most name recognition and a record of reaching soaring prices. Ethereum is the second-largest cryptocurrency and has become popular for its smart contract technology. Then there’s Solana, with its low transaction fees, speed, and energy-efficient processing.
While these distinctions are interesting, they don’t make one or another of these three coins better or worse for buying a house.
The process for buying a house with all three is exactly the same if you plan to take out a mortgage: You’ll need to convert the access to cash and document the sale in order to use the funds for the home.
Now, price matters, of course. Someone who plans to use their crypto assets to buy a home might look at the value of each and decide which to use based on which is highest or appears most stable. But again, these sorts of decisions are entirely up to you and your financial advisor.
For the purposes of homebuying, none are particularly better or easier to use.
And since traditional banks and mortgage lenders generally don’t accept crypto for down payments, closing costs, or mortgage payments, they will only be concerned with:
- The documentation of the sale
- That the cash from the sale is in USD
- That you have the cash in your bank account in time to close
The upfront costs to buy a house, including the down payment and closing costs, can be steep. Homebuyers may look not only to their savings but to other assets – cryptocurrency included – to come up with the necessary funds.
Solana can be one of the assets you use, provided you meet the criteria and follow the documentation guidelines.
- You can use Solana and other cryptocurrencies to qualify for a mortgage if you convert the crypto to cash first
- At this time, you cannot use crypto to pay for your down payment and closing costs or your monthly mortgage payment
- You must prove ownership of the crypto asset and provide records of the sale to your lender
The information in this article does not constitute financial planning advice. Please consult a financial planner regarding your specific situation.