Like most early adopters of cryptocurrency, Tyler Satre first heard of Bitcoin in early 2011. Intrigued, he downloaded a program to generate Bitcoin in March of that year, “but nothing happened” with it, he recalls.
He abandoned the idea until a couple months later, when he noticed the price of Bitcoin had jumped up from $1 per bitcoin to several dollars. His interest once again piqued, he began mining the cryptocurrency, curious about where it would head.
Satre saw – and continues to see – cryptocurrency as a way of solving the problem of sending money to people on the internet and throughout the world. What he couldn’t have foreseen back in 2011 was that a few years later, he would buy a house with cryptocurrency.
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In those early days, Satre “earned a decent amount of Bitcoin,” he says. Even as prices fluctuated wildly at times, he was sure of Bitcoin’s potential.
“I did feel confident all along,” he says. “I saw it solving a need, even if people didn’t always see that.”
But as Bitcoin’s value rose, it surpassed Satre’s expectations.
“I had more modest expectations,” he says of Bitcoin’s meteoric rise. “I had the dream it would get really big, but I didn’t expect it to be where it is.”
As it would turn out, one dream led to another – the American dream. When Satre and his wife decided to buy a home, he sold some of his Bitcoin earnings to put toward the down payment.
“Bitcoin helped us buy a house, and now we’re building a house using some Bitcoin earnings as well,” he says.
Not only that, Bitcoin turned out to be his ticket to entrepreneurship. While working as a loan officer for Fairway Independent Mortgage Corporation (which owns Home.com), Satre used his downtime to build a software tool called Lightning Estimates for running mortgage estimates.
“I had a deal with my now wife that if I hit a certain amount of crypto gains, I’d be able to leave my full time job to work on my mortgage estimate tool and try to build it into a business,” he says. “I hit that number in late 2017 and started working full time on it in 2018. Without crypto, that company would have just existed as something I put together in my free time to help save me time when running estimates for clients.”
As Bitcoin continues to make gains – it hit an all-time high of $68,000 in November – more crypto early adopters may be considering ways to leverage their earnings into more tangible assets.
Fortunately, that may be easier to do than you think.
Buying a house with cryptocurrency doesn’t have to be complicated. But there are some steps you need to take to make it work.
Here’s how to buy a house with cryptocurrency:
Tyler’s advice to other homebuyers considering selling their cryptocurrency for a down payment on a house: “Plan ahead.”
He began selling small amounts of Bitcoin well before he and his wife started the homebuying process. Because the money from those sales was sitting in his bank account for several months prior to getting their mortgage, their lender didn’t need as much documentation for their down payment funds.
Large recent deposits can raise red flags for underwriters and may require a letter of explanation. But if the money has been in your account for several months, it doesn’t need to be documented in the same way.
Convert your crypto to U.S. currency
Before it can be used to buy a house, cryptocurrency must be converted to U.S. currency.
“The biggest thing is getting it converted to a stable currency, because it’s not a stable currency from [a lender’s] perspective,” says Jeff Satre, a branch manager with Fairway in Ashburn, Va., and Tyler’s father.
Lenders cannot accept cryptocurrency itself for your down payment and closing costs, only U.S. dollars, so you will need to sell however much you intend to use and have the money in your bank account prior to closing.
Your lender’s underwriting team will need to verify that the crypto assets were in your digital wallet or digital exchange account for at least 60 days prior to when you sold them. Jeff recommends liquidating the crypto at least two weeks before your closing date in case the exchanges are slow or there are other delays getting the money into your account.
Will there come a day when buying a home using a cryptocurrency itself, rather than earnings from the sale of it, will be common practice?
“I don’t know if crypto will ever become a medium of exchange,” Jeff says. “At this point, no one is going to sell you a house in Bitcoin. Maybe in the future they will.”
You will likely need to convert crypto to USD if you’re taking out a loan that requires cash reserves as well. For instance, if you are buying an investment property, you may need several months of reserves. Some loan programs will not accept reserves in the form of crypto, so it’s best to consult with your loan officer about how and where the money must be available.
Although Bitcoin, and cryptocurrencies in general, are recent phenomena, documenting them for the purposes of buying a home is fairly standard.
“It’s not difficult to use cryptocurrency to buy a home,” Jeff says. “Like any other asset, it must be verified.”
“The way I view it, it’s no different than investing in stock,” he adds.
Start by looking at the exchange you use for buying and selling Bitcoin or other crypto assets.
“The exchange you use for your cryptocurrency will show you when the crypto was purchased, where the funds came from, and when you sold,” Jeff explains. “As with any asset, make sure to keep good records.”
Tyler says he didn’t experience any particular complications from using his Bitcoin earnings for the purchase. He provided his lender with records of the sale from the exchange he used, as well as bank statements showing when the money was deposited and where from.
“I felt like it was just like any other asset that was not cash that I was moving to buy a house,” he says.
Again, your lender’s underwriting team will need to verify that the crypto assets were in your digital wallet or digital exchange account for at least 60 days prior to when you sold them.
Both Satres recommend being mindful of how price fluctuations will affect your homebuying process. If you plan to sell X amount of Bitcoin to cover a certain portion of your down payment, you could be taking a risk by waiting to sell it.
Should the price drop, you may come up short on the money you need to close.
“Have the cash ready because you don’t know if it’s going to fluctuate,” Tyler says.
That’s another reason Jeff suggests liquidating however much you plan to sell at least two weeks ahead of closing, to avoid a crisis as you’re getting ready to finalize the purchase.
How to buy a house with cryptocurrency FAQs
You can use money earned from the sale of cryptocurrency assets to purchase a house. But you cannot use the cryptocurrency itself, such as Bitcoin or Ethereum, for your down payment or closing costs.
Yes, you can use money earned from selling Bitcoin to purchase a house. The money must be converted to U.S. dollars, and you must provide your lender with transaction records from the sale, and bank statements showing the sale proceeds in your bank account.
You can pay your mortgage with money earned from the sale of crypto assets. At this time, you cannot pay your mortgage in cryptocurrency; it must be converted to U.S. dollars. But that could change in the future if lenders embrace the technology to allow crypto mortgage payments.
Coming up with a down payment is often a major hurdle for prospective homebuyers. But those who were early adopters of Bitcoin and other digital currencies may be able to turn their crypto savvy into the funds needed to purchase property.
Because it’s crucial that you document those earnings in order to use them toward a home, it’s best to work with a lender early in the process so you know exactly what documentation is needed. Your lender can walk you through the requirements and help you be strategic in leveraging digital earnings into a real world asset.
Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.