You can use your credit card to pay some of your closing costs when buying a home. But there are limits. I'll give you the details in this article.
As a rule of thumb, mortgage closing costs are about 2%-to-5% of the loan amount. They add up to thousands of dollars. Plan on paying most of the fees at closing when purchasing a home.
However, homebuyers can charge some fees to a credit card before closing.
Which closing costs can I pay with a credit card?
Homebuyers can pay certain closing costs by credit card, such as:
But there are limits. Whether you can pay closing costs with a credit card depends on the lender and the following rules.
- You can pay costs by credit card before closing, not at closing. And the fees must be customary, the types that homebuyers typically pay before closing.
- The closing cost you put on your credit card may not exceed 2% of the loan amount. For example, if your loan amount is $350,000, you could charge up to $7,000.
- You must have enough money in your bank account to cover the charges.
In Chicago, homebuyers usually hire a home inspector to inspect the property. An inspection report costs around $500.
Next, your lender will ask you to pay for the appraisal report upfront. An appraisal report is about $450, depending on the lender, property, and loan type.
Then, a few days before closing, pay the homeowner's yearly insurance premium. The cost varies depending on the property type, location, and insurance company you select. Insurance for a $350,000 loan on a Chicago home costs about $1,200 yearly.
Suppose you paid $2,150 upfront by credit card. In this case, we would check your bank statement to ensure you have enough cash to cover these charges.
At closing, you pay the remaining costs by cashier's check or wire transfer. Check out our Loan Estimate Explainer to understand your closing costs when buying a home.
Book time with a mortgage expert. Ask questions, get straight answers, and find out how to start on your home loan.
Will additional credit card debt affect my loan approval?
Additional credit card debt can potentially affect your loan approval. So, before charging closing costs to your credit card, consider how it will affect your debt-to-income ratio (DTI).
The lender must account for any additional debts you take on after applying for the loan. They typically monitor your credit through the mortgage process to see recent activity and ensure you still qualify for the loan.The lender may change the loan decision after factoring in other debts.
We approved your loan, but your debt-to-income ratio is near the limit.
Then, you charge $3,000 in closing costs to your credit card. After updating your monthly credit card payments, your debt-to-income ratio exceeds the limit.
We may ask you to pay off debts before closing to qualify for the loan or deny your loan application.
To ensure a smooth closing, be careful when using credit, and don't open new accounts after applying for a mortgage. Instead, wait until you buy the home to open new credit cards or other debts.
Feel confident about buying a home. Get a verified mortgage pre-approval letter from NewCastle Home Loans so you know you're ready to buy.
Can I use credit card points to pay closing costs?
You may use reward points to pay closing costs if you convert them and deposit the cash into your bank account. Depending on the deposit size, the lender may ask you to verify the source. So keep the paperwork proving you cashed in the reward points.
Using credit card points for closing costs is not a standard practice, and acceptance may vary depending on the specific circ*mstances and parties involved. Communicate with your lender to ensure they accept your method of paying closing costs.
FAQs
Sadly, mortgage lenders typically don't accept credit cards and require that you either wire the money or pay with a cashier's check.
Can you use your credit card when closing on a house? ›
While you're waiting to close on a home, you can still use your credit card, but it's best to only use it for small purchases and pay off the balance in full. Do not make large purchases you cannot afford to pay off that'll leave you carrying a significant balance from month to month.
Can I use a credit card to pay my mortgage payment? ›
Credit cards can be used to pay nearly any expense or bill you have, and this can even include your mortgage or rent payment. However, you'll want to think long and hard before you use plastic to pay for regular expenses, and you'll need to have a plan to pay your balance off so you don't wind up with long-term debt.
What are the payment methods for closing costs? ›
There are a few ways that you can pay your cash to close. More secure forms of payment include cashier's checks, certified checks and wire transfers.
What is considered a large purchase on a credit card? ›
A large purchase is one that would bring you over 30 percent of your credit utilization, the percentage that most experts agree you should stay under. So, simply put: “big" depends on your overall credit limit.
Can I skip my last mortgage payment before closing? ›
Ultimately, you must pay for every day that you own your property and will not pay for the days that you no longer own it. If you overpay, you'll get money back. If you don't make that last mortgage payment, you should be okay – as long as everything goes as planned.
What bills can I not pay with a credit card? ›
Depending on the type of bill and the merchant, you may be able to use a credit card to pay bills. Mortgages, rent and car loans typically can't be paid with a credit card. You may need to pay a convenience fee if you pay some bills, like utility bills, with a credit card.
Can I pay my mortgage with my Amex? ›
Mortgage companies generally do not allow borrowers to make mortgage payments with a credit card. Credit card processing fees typically run 1.3% to 3.5% of the transaction amount, and mortgage companies don't want to absorb those fees.
Why can't you pay mortgage with debit card? ›
Mortgage servicers are usually hesitant to include debit cards as a legitimate payment option because of the processing fees associated with debit card transactions. But accepting debit cards for mortgage payments can actually be cost-effective for mortgage servicers.
What is the most seller can pay in closing costs? ›
For a conventional loan, sellers can pay your closing costs up to 3% of the property's purchase price if your down payment is less than 10%. If your down payment is 10% or more, the seller credit increases to 6% of the purchase price.
Closing costs on a mortgage loan usually equal 3% – 6% of your loan balance. Appraisal fees, your attorney's fees and inspection fees are examples of common closing costs. The specific closing costs you'll pay depend on the type of loan you have, your home's value and your state's laws.
What are the biggest closing costs usually paid by buyers? ›
Origination fee (or service fee)
Most lenders charge an origination fee to cover service and administrative costs. This is typically the largest fee you pay to close your mortgage.
How not to pay a down payment on a house? ›
The easiest way to avoid a down payment is to qualify for one of the two no-down payment mortgage programs backed by the government: a USDA or a VA loan.
Can you put a down payment on a car with a credit card? ›
Can you use a credit card for a car down payment? Putting a car down payment on a credit card is an option that many dealers are open to. Dealers may be more willing to allow this type of payment for the total amount, or a partial amount, of your car's down payment.
Can you use a credit card to pay down a loan? ›
If your lender allows it and you are given enough of a credit limit, you may be able to pay a portion of your entire balance of your home, car or student loans with a credit card. Federal student loan issuers, however, are restricted by the Department of Treasury from accepting credit card payments.
What happens if I use my credit card on the closing day? ›
What happens if I use my credit card on the closing date? Transactions that post to your credit card on your closing date may be included in your balance calculation.
Can I use my credit card before the closing date? ›
Can I use my credit card between the due date and the closing date? Yes, you can use your credit card between the due date and the credit card statement closing date. Purchases made after your credit card due date are simply included in the next billing statement.
How soon after closing can I use my credit card? ›
How soon after closing can I use my credit card? If you already have a credit card (or opened a new card shortly after closing on a home mortgage loan) there's no need to wait before using the account.
Do lenders check your credit at closing? ›
Do Lenders Check Your Credit Again Before Closing? Yes, lenders typically run your credit a second time before closing, so it's wise to exercise caution with your credit during escrow. One of your chief goals during escrow should be to ensure nothing changes in your credit that could derail your closing.
