You can’t directly buy a house with a credit card. While waiting to close on a mortgage, avoid opening new credit cards or loans. This can negatively impact your credit score or debt-to-income ratio. Instead, use your existing cards normally for everyday purchases. Wait at least one business day after closing to apply for new credit cards. This ensures your mortgage has funded and avoids immediate credit checks.
Closing costs range from 3-6% of the purchase price. To successfully close, open an escrow account held by a third party. An experienced agent knows how to structure reasonable closing dates. You typically can’t pay the full price of a house with a credit card due to high fees and low credit limits. However, cards can help cover some costs like closing fees or part of a down payment. While quicker and simpler, using credit comes at a price of high interest rates and card fees. You’ll also need to pay off the balance much faster than a traditional 30-year mortgage.
If you need help with closing costs, you may be able to use gifts from family or take advantage of down payment assistance programs, some of which help with closing costs.
How To Pay Closing Costs With a Credit Card:
-
Earn Rewards: Paying closing costs with a credit card allows you to earn points, cashback, or miles. This can help offset some of the costs.
-
Cash Flow: Spreading out expenses over time provides flexibility in managing cash flow during the home buying process.
-
Interest-Free Period: Many cards offer a period for new purchases with no interest.
Make sure you pay off the balance promptly to avoid eroding savings with high interest charges. Inform your closing agent you intend to use a credit card and provide the necessary information. After, monitor your statement to ensure the correct amount was charged.
There may be restrictions, like maximum amounts able to be paid by card, so confirm with each lender. Since they pay processing fees, some lenders won’t accept cards.
You can’t pay entire closing costs with a card. Running up card balances while purchasing a home isn’t advisable either.
Alternatives to help with closing costs include grants, negotiating with the seller for a concession, or down payment assistance programs.