One of the biggest obstacles to home ownership is the payment.
After all, the typical American hardly has anything in the way of savings.
At the last look, the median amount in a transaction account such as control, savings or similar was only $ 8000 according to Federal Reserve.
And for these 35 years and below, only $ 5,400, although the average for this key the first time Home Buyerkohort is a slightly higher $ 20,540.
The thing is that the average home today is priced higher than $ 355,000, which means these savings do not go very far.
How can you finance the payment for a home purchase?
- Control or savings account
- Money market or CD
- Investment Account
- Stock options
- Home Equity Line of Credit (Heloc)
- Home capita loan
- Bridge loan
- Gift Fund
- Grants
- Help with Payout
Although we know that Americans are not the best savors, they are good news (I assume) that you typically do not need much in the way of payout to buy a home.
Apart from the many available zero loan programs, including VA loans and USDA loans, there are also countless payout programs.
And even if you do not qualify for one of them, it only requires a 3% payment to comply with loans supported by Fannie Mae and Freddie Mac.
So on a $ 355,000 home purchase you only need about $ 10,650. For FHA loans, the payout requirement is a slightly higher 3.5%, or approx. $ 12,425 using the same example.
With regard to financing the payment, mortgage lenders are also very flexible, which allows for gift funds in many cases if it comes from a qualified donor, such as a parent or relative. Or even a gift of equity.
If you happen to give your own payment, the settings are also quite endless.
The funds can come from a verified control, savings, money market or CD. Or from shares or stock options, a pension account or revenue from a home capital (Heloc), home capita loan or embroidery.
There are plenty of options, but they all require sourcing, and in some cases spices to make sure they can be used.
But there is an option that cannot be used for a payment when you take out a mortgage loan and it is a credit card.
Per Fannie Mae can “Under no circumstances credit card financing is used for the payment.”
The same goes for Freddie Mac and FHA. No Credit Cards allowed for Payout.
Why can’t credit card be used for a payout?
When it comes to it, personal unsecured loans, such as a credit card, are not acceptable sources of funds for payment on a house.
And when you think about it, it makes a lot of sense. Mortgages do not like the idea of taking a loan to qualify for a loan, especially if it is unsecured, also known as not supported by any security.
That’s exactly what you would do if you were able to put the 3% payment on plastic.
You will run with another great responsibility for accompanying your new home loan, which could put you in an uncertain position.
It would also put the lender in a risky place, which is why they do not allow it. Therefore, it is imperative to arrange to have allowed funds available before applying for a mortgage loan.
In reality, you have to sell these funds several months in advance to avoid unwanted control.
A good rule of thumb is to put the money in a savings account at least two months before applying for a mortgage loan. This makes the money “spicy”.
In addition, it is wise not to act on that account in these two (or more) months to avoid unnecessary documentation requests, such as an explanatory letter.
Credit card points can be used for mortgage loan payout
Even if you can’t use a credit card for payment, you can use credit card points!
These days, many people have collected a ton of these points thanks to beautiful reward programs from issuers such as American Express and Chase.
In fact, it is not unheard of to have a million points or more if you have played that game for several years.
And while a cash redemption for your credit card points may not be the best value, it may meet some of all your payout requirements.
For example, chases ultimate rewards can be redeemed in an ear. So if you have said 500,0000 points they are worth $ 5,000.
You can pay them out and they would be considered acceptable funds for use against closure costs, payment and even reserves if necessary.
The only warning is that the reward points must be converted to cash before closing your loan.
A good plan is to deposit them into a savings account (or similar) several months in advance to avoid additional paperwork.
You can also use a credit card for certain costs
Even if you do not have credit card points for redemption, a credit card is still allowed to cover certain closure costs associated with your home loan.
E.g. Freddie Mac says you can use a credit card to pay for loan origin fees, commitment fees, lock-in fees, assessment fees, credit reports and even flooding certifications.
But this does not necessarily make you favors to free up funds for a payment.
Why? Because you are still required to have sufficient verified funds to cover these costs, in addition to any means required to qualify, such as the payment.
In other words, you cannot charge these fees on a credit card to set up your bank account.
However, you can still charge them if you want, maybe to earn points or postpone costs via a 0% APR card and they are not required to be paid for closure.
However, they will be considered in your debt-to-income relationship (DTI) through a recalculation of your minimum monthly credit card payment.
Long story card, don’t rely on a credit card for any of the mortgage loan transaction as it doesn’t really give any relief. And if anything, it could jeopardize your loan.
The same is true of pushing before applying for a mortgage loan. Don’t do it!
Let’s also remember that credit cards have some of the highest APRs around, while mortgage rates tend to be the cheapest debt you can get your hands on.
Read more: Is a mortgage loan considered a good debt?
