You put out a lot of cash while purchasing a house.
It’s easy to be tempted to put at least some of it on plastic.
So, can you pay your closing costs with a credit card?
While it seems like a wild question, the reality is that, yes, you can usually pay at least some of your closing costs with your credit card.
However, that depends on the type of closing costs… and it’s not always a great idea.
What is a Closing Cost?
A closing cost is any fee paid to finalize a real estate transaction.
These fees are paid by the buyer, the seller, or both. The fees cover a wide range of services involved in transferring property ownership.
Closing costs can include things like:
- Appraisal fees
- Attorney’s fees
- Credit report fees
- Deed recording
- Loan origination fees
- Property taxes
- Title insurance
- Underwriting fees
A lot of these can be charged to credit. When you purchase your appraisal, pay your attorney, or even buy a credit report, you can usually charge it to credit. You won’t lose an FHA loan or get yelled at by your loan officer for putting your appraisal on your credit.
Can You Pay Closing Costs with a Credit Card?
Some of them, but not all of them.
You can’t pay your entire closing costs with a credit card because some of them just can’t be charged.
For example, you can’t charge loan origination fees to your credit card, nor can you charge title insurance to your credit card.
Further, running up a credit card balance while you’re trying to purchase a home is not a good idea. It could impact your debt-to-income ratio or credit score.
Generally, a credit card can’t pay anything at the closing table. But you’ll determine which fees to pay when you get your loan estimate.
Which Closing Costs Can You Pay With a Credit Card?
Here are some specific examples of closing costs that can be charged to your credit card:
- Attorney’s fees.
- Credit reports.
- Document preparation fees.
- Home inspections.
- Notary public fees.
- Pest control inspections.
- Attorney’s fees.
- Homeowner’s insurance.
There are things you can’t charge to your credit card, like property tax, private mortgage insurance (PMI), paid-down points, and generally any fees associated directly with the mortgage loan, like an origination fee. It wouldn’t make sense to pay down a discount point with credit.
A lot of the big-ticket items can’t be paid through credit cards. But you could, for instance, purchase a homeowners insurance policy on your credit card (assuming that your lender doesn’t want you to fold it into escrow).
You should still be conscientious regarding your credit card. It could interfere with your mortgage loan. If your mortgage lender sees you run up a bunch of credit debt, it could impact your loan amount. Likewise, opening a new credit card for moving costs could affect your mortgage loan even if you don’t use it. Wait until after you’ve closed.
Can You Pay Your Cash-to-Close with a Credit Card?
Another thing you need to consider is that closing costs and cash-to-close differ. Your cash-to-close will also include your down payment, property taxes, etc. It will also include any unpaid closing costs.
You can’t charge your entire cash-to-close to a credit card, as many of the same restrictions apply. You must bring a cashier’s check or wire payment to pay your cash-to-close.
Can You Pay Your Cash-to-Close with a Personal Loan?
If you don’t have the cash on hand to pay your cash-to-close, you may be able to take out a personal loan to cover the costs.
Personal loans can often be funded quickly, and you may even be able to get one with a 0% interest introductory rate.
While lenders won’t let you use a personal loan for your down payment, they sometimes will let you use one for your other closing costs. But you must report the personal loan, which will impact your debt to income.
That’s not to say this is a good idea. But if you can find a personal loan with great rates, it may not be any different than rolling your closing costs into your loan.
Why Do Your Credit Expenses Matter When Buying a House?
Your credit expenses matter when you’re buying a house because they can impact your ability to get a mortgage.
Lenders will look at your debt-to-income ratio, which factors in your monthly debts, including your potential new mortgage payment, car payments, student loans, etc.
They want to see that you’re not too leveraged, meaning you don’t have too much debt relative to your income.
If you’re carrying a lot of credit card debt, that could impact your ability to get a loan or the interest rate you’ll pay on your loan.
But if you’ve already paid all your credit card debt before you even tried to buy a house, it might not matter. Ask your lender how close you are to meeting your debt-to-income restrictions.
Can You Use a Credit Card for Moving Expenses?
Once you’ve officially closed on your house, the bank doesn’t own you anymore. You can use your credit card for all your expenses after you buy a house. While you shouldn’t rely upon it, don’t worry too much if you feel a little tapped out for cash. You can use your credit cards again once you have your keys.
Note that your credit card doesn’t care what you do with the money. The only person who cares is your mortgage lender. Well, and the seller, if your mortgage is canceled because of your debts.
Can You Borrow Closing Costs If You’re Buying in Cash?
Here’s a more interesting thought experiment (or perhaps not, if you’re a cash buyer).
Most of the restrictions on borrowing money relate to getting a mortgage. What if you aren’t getting a mortgage?
Then you can do what you want.
If you’re trying to buy a $100,000 house all in cash, you can take out a $50,000 personal loan, $30,000 HELOC, and $20,000 in cash advances from your credit card. You can borrow from friends and family. You can over-leverage yourself to the hilt.
Most of the regulations are purely based on mortgage lending. You can do what you want if you aren’t getting a mortgage. You won’t have any mortgage-related closing costs, but you’ll likely want an appraisal, home inspection, and title search.
Theoretically, though, when buying a house in cash, you could buy it with zero closing costs… except maybe some money to a real estate attorney to review your contract and the title company to record the deed. You’re not required to do an appraisal or home inspection; while you do need to record the deed, you aren’t required to buy title insurance.
Some people buy rental properties through personal loans. If you can swing it, it does work.
But it’s not a great idea.
There are very few lending products as buyer-friendly as a mortgage right now. This may change as interest rates continue to creep higher. Usually, when someone is buying an investment property and borrowing money outside of a mortgage, they’re still purchasing it through a HELOC… which is essentially a type of mortgage.
Because mortgages are backed by real estate, real property, they can provide much more beneficial terms.
What Are Other Ways You Can Pay Your Closing Costs?
While you can’t charge your closing costs to a credit card, other ways exist to cover these expenses.
For example, you could ask the home seller to pay some or all closing costs.
It’s also common for lenders to offer programs that will allow you to finance your closing costs or roll them into your loan.
Finally, you can get your closing costs from your family. However, your family must write a note saying it’s not a loan but a gift.
Sometimes, paying your closing costs with a credit card is possible, but it’s not always the best idea. Consider all your options before deciding how to pay your closing costs.
Sometimes, paying your closing costs with a credit card is possible, but it’s not optimal. Generally, if you’re trying to pay closing costs with a credit card, you may not have enough cash to purchase a house.
Buying a house comes with a lot of unexpected costs. You could get into the house to find that it had foundation damage you didn’t notice. You could discover your property taxes are being reassessed and are much higher than you thought. A lot of things could happen.
Consider all your options before deciding how to pay your closing costs.
It depends on the type of closing cost. Some, like appraisal and attorney’s fees, can be charged to credit, while others, like loan origination fees and title insurance, cannot.
No, you cannot. Cash-to-close includes your down payment, property taxes, and unpaid closing costs. You must bring a cashier’s check or wire payment to cover your cash-to-close.
You don’t want to run up a credit card balance while trying to purchase a home, as it could impact your debt-to-income ratio. But you can continue using your credit card before starting your home-buying journey.
No, you cannot use a credit card for your down payment. You must pay your down payment in cash or with a cashier’s check. But there are ways to negotiate a lower down payment or closing costs.