Can Homebuyers Use Crypto As a Mortgage Down Payment?

Truth is, crypto cannot be used directly as collateral for conventional, FHA, VA, or USDA home loans. These require dollars. But the good news is that you can liquidate your crypto holdings, converting them to cash, which can be used toward your down payment, closing costs, or financial reserves, thereby helping you qualify for a regular mortgage loan.

“Traditional mortgage lenders require crypto to first be converted to U.S. dollars, with the funds deposited into a bank account and seasoned – meaning the funds must remain there for at least 60 days before they can count toward your down payment, closing costs, or reserves. You must also provide a paper trail showing the liquidation source and transaction history so that it’s all above board,” explains Sam Cooling, lead editor of 99Bitcoins.com.

Other lenders may let you use converted crypto right away, if you can prove 60-day ownership prior to conversion. Check with your lender’s guidelines and get an exact picture on how to proceed.

“The lender needs to see that your funds are stable and not borrowed – ensuring you can cover the loan. You can convert to U.S. dollars via a reputable exchange like Coinbase or Kraken, then transfer the funds to a bank account. Good options include a money market account for low risk and decent returns, or a checking account for easy access,” says Steven Glick, director of mortgage sales for HomeAbroad.

Personal finance expert Andrew Lokenauth had a homebuying client last September who converted $100,000 in Ethereum to dollars.

“We documented every step, including the sale on Coinbase, the transfer to his bank, and two months of statements showing the money remained there,” he says. “The rule of thumb is that a clean paper trail equals a happy mortgage underwriter.”

Required Documentation

Lenders need to comply with financial rules, so they’ll want to carefully follow your crypto money trail – from blockchain to bank. If you can’t prove it, in the lender’s eyes you don’t own it, Cooling cautions. That means you must provide the necessary documentation, including:

• Statements from your crypto exchange showing the sale

• Bank statements showing the deposit

• 60 days of “seasoning” showing funds in your account over that time

• Documentation of the original crypto purchase to prove it wasn’t a loan.

“Lenders are paranoid about money laundering. I’ve seen deals fall apart because buyers couldn’t prove where their crypto came from, so be careful to document everything and save the paperwork,” suggests Lokenauth.

Specifics by Loan Type: Conventional, FHA, VA, USDA

Fannie Mae and Freddie Mac will typically allow crypto liquidation to be used for your down payment, closing costs, or financial reserves on a conventional mortgage loan, so long as you have proper documentation. You’ll also likely need a credit score of 620 or higher and a down payment of between three percent and 20 percent minimum for this type of financing.

“However, FHA, VA, and USDA loans are much stricter and may not allow crypto-derived funds,” adds Cooling.

A good first step for any mortgage, conventional or otherwise, is to check with your lender on their exact crypto liquidation and documentation requirements.

If your FHA lender permits the use of liquidated cryptocurrency, you’ll still need a credit score of 580 or higher if you plan to put at least 3.5% down, or they’ll require a 10 percent down payment if your credit score falls within 500 to 579; you’ll also be on the hook for mortgage insurance.

To qualify for a VA loan, you must be an eligible active-duty military member, veteran, or surviving spouse; no down payment or mortgage insurance is needed, but you will pay a one-time upfront funding fee typically 2.15% of your loan amount. Aim for a credit score of 620 or higher to qualify.

Those eligible for a USDA loan, which also requires no down payment or mortgage insurance, have to live in an approved rural or suburban location. You typically need a credit score of 640 or higher, and your household income also must fall within USDA’s established limits; in most cases, the limit is set at 115% of the area’s median income. The USDA charges an upfront guarantee fee of 1% of the loan amount, which can be included in the loan, and an annual guarantee fee of 0.35% of the remaining loan balance, paid monthly as part of the mortgage.

“Jumbo loans might accept crypto collateral with specialty lenders, but they demand higher credit and income thresholds,” continues Glick.

Finding a Lender

Even if you qualify for a particular loan program, it could be challenging to find a participating lender that accepts liquidated crypto.

“I’d say about 40 percent of the banks and lenders I deal with on behalf of my clients are still hesitant to work with crypto funds,” Lokenauth says. “The best approach is to call ahead and specifically ask about the lender’s crypto policies.”

Some lenders could deny you financing or tighten the eligibility requirements because crypto isn’t recognized as a traditional asset like stocks or bonds under agency guidelines.

“Most lenders and financial institutions shun crypto because they fear volatility, compliance nightmares, and the lack of centralized custodianship. They may sprint the other way at the first mention of Bitcoin,” says Cooling. “It’s important to disclose upfront with a given lender that your down payment is crypto-derived and demonstrate that it’s been properly converted and seasoned for the 60 days required. Transparency will build trust and keep underwriters calm.”

The good news is that there are plenty of lenders out there. If one lender won’t touch your application due to crypto, another one might.

Volatility Risk

Anyone dealing with crypto – including borrowers and lenders – needs to be aware of the volatility risk associated with this currency.

“Bitcoin or Ethereum could plummet 15 percent overnight, which is a big risk,” says Glick. “To manage this risk, it’s important to liquidate your crypto well before you need the funds for a mortgage and transfer those dollars to a safe account with a trusted bank.”

Cooling recommends liquidating crypto into cold (offline) storage using stablecoins like Tether and USD Coin, which are pegged to the U.S. dollar, or into a high-yield savings or money market account – not a volatile wallet on an exchange like Binance, Coinbase, or Kraken.

Advantages and Disadvantages

Pros

• Liquidating appreciated crypto can provide a substantial down payment.

• Large crypto holdings can demonstrate financial strength and improve loan approval odds.

• Crypto offers an alternative, flexible funding source beyond traditional savings.

Cons

• Lenders may require extensive documentation to verify the source and legitimacy of crypto funds.

• Many traditional lenders don’t accept crypto proceeds, limiting financing options.

• Crypto’s volatility can reduce your funds between liquidation and cash conversion.

• Converting and documenting crypto can be time-consuming—plan ahead.

• Selling crypto may trigger capital gains taxes—consult a tax advisor.

Conclusion

Using cryptocurrency to help finance the purchase of a home has its pluses and minuses. It can unlock significant dollars you can use for your closing costs, down payment, or financial reserves. But it also demands careful preparation, thorough documentation, and a clear understanding of lender requirements.

You’ll also have to navigate challenges like market volatility, completing the required paperwork, and dealing with possible tax consequences. Additionally, finding a participating lender willing to accept crypto-based funds can be tricky, as many traditional institutions remain cautious about adopting digital assets.

To make a more well-informed choice, weigh your options carefully and allow plenty of time to liquidate and season crypto funds as required.