Should You Buy a House With Your Credit Card?

              buy a house
 
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If you’ve found a home that costs less than your available credit limit, skipping the mortgage process and charging the property to your credit card might seem like a viable option—and in many ways, it is.

You can buy a house with your credit card to some benefit, but this nontraditional approach to homeownership has several disadvantages you should carefully consider before you put down your plastic.
Pros of Using Your Credit Card


Buying a home with your credit card instead of going the traditional mortgage route has a few key advantages, such as the following:
When you apply for a mortgage, you’ll pay additional fees that increase your total cost. Purchasing a home with a credit card eliminates mortgage-related closing costs and application fees.
Modern mortgages come with a slew of forms to fill out and documents to send. With a credit card, there is no lender involvement and practically no paperwork.
In most cases, you will end up paying back the loan much faster than with any other mortgage or loan even if the interest is the same in both cases. This is because by using your credit card, you avoid paying the interest that makes up a good portion of the early installments of your monthly mortgage payment.
Con: Debt-to-Income Ratio

If you buy a house with a credit card, your monthly payments are much higher—up to three times the amount you would pay for a mortgage through a bank or other lender.

This can cause your debt-to-income ratio to fall out of proportion to your income. Having a high debt-to-income ratio will make it difficult to qualify for additional credit or loans in the future.
Con: Reduced Credit Score

Not all debts are equal. The amount you owe on an outstanding credit card balance accounts for 30% of your FICO credit score.

Once you buy a house and have a large outstanding balance on your credit card, your credit score will drop—which could make it harder to secure other loans in the future.
Con: Maxing Out Your Card

If the cost of buying a home will cause you to max out your credit card, there will be additional consequences. Maxing out a credit card will lower your available credit limit, increase your debt limit and lower your credit score.

If your card remains maxed out, you won’t be able to use the credit line for emergencies—which could create financial strain in the future if something comes up.
Seek Professional Advice

Using a credit card to buy a house should be considered your last option unless you are a real maven with creative financing and can calculate all the risks to the fullest.

Before jumping in too deep, it’s a good idea to speak with an accountant, financial adviser and a tax attorney about the best financing options for you.

Updated from an earlier version by Cina Coren.


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Keller Williams Solutions Realty, Manassas VA
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