When you buy a house, closing costs can be several thousand dollars. And coming up with the cash isn’t always easy. It makes sense to put closing costs on a credit card to avoid a sudden financial hit. But can you pay closing costs with a credit card?.
Generally, the answer is no. Most mortgage lenders and title companies don’t accept credit cards for closing costs. You’ll typically need a cashier’s check or wire transfer.
However there are exceptions. You may pay some fees with a credit card before closing. Or a title company may allow you to split payment between a card and cashier’s check.
Let’s explore whether you can pay closing costs with a credit card
What Are Closing Costs?
Closing costs are fees charged when you close on a mortgage They cover expenses like
- Title insurance
- Recording fees
- Origination charges
- Appraisal fees
- Credit report fees
Closing costs range from 2% to 5% of the home’s sale price. For a $300,000 home, expect to pay $6,000 to $15,000.
Before closing, the lender provides a loan estimate detailing your costs. This helps you plan for the cash needed to close.
You’ll generally pay closing costs upfront when you close the loan. But you may prepay certain fees like the appraisal or inspection.
Why Credit Cards Aren’t Accepted for Closing Costs
Most lenders and title companies don’t take credit cards for closing costs. There are several reasons why:
Processing Fees
Processing fees are added to credit card payments, which can add up to a lot for big closing cost deals. Companies want to avoid these fees eating into profits.
Increased Borrower Debt
Lenders already provide a sizable mortgage. Allowing borrowers to charge closing costs further raises debt burdens and repayment risk.
Payment Logistics
Closing costs involve payments to various parties like title companies and government entities. Processing multiple card payments is cumbersome.
Transparency and Compliance
Real estate transactions demand clear financial records. Credit cards can complicate tracking funds and regulatory compliance.
Company Policies
Many lenders prohibit card payments for closing costs to limit risks and hassles. Their policies typically prevail.
When Credit Cards May Work for Closing Costs
While you can’t directly pay closing costs with a card, some options exist:
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Smaller Fees – Inspection or appraisal fees may be chargeable depending on the vendor’s policies.
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Cash Advances – Taking a credit card cash advance is risky given high interest rates and fees.
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Transferring debt to a card with a lower interest rate may help with long-term affordability, but it doesn’t directly cover closing costs.
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Personal Loans – A personal loan could be an alternative to a costly cash advance for financing closing costs.
Always consult your lender before charging closing fees to credit cards. Policies differ, and charges could impact loan approval.
Tips for Paying Closing Costs
If you can’t pay closing costs upfront, consider:
- Rolling costs into your mortgage balance
- Asking the seller for concessions
- Securing down payment assistance
- Negotiating lender credits
Shopping lenders and waiving optional services like owner’s title insurance also helps reduce costs.
When Credit Cards May Work for Home Buying
You likely can’t buy a home outright with a credit card. But cards still offer advantages:
- Earn rewards on everyday purchases to put toward your home fund.
- Transfer high-interest debt to a lower rate card so you qualify for a mortgage.
- Build your credit with responsible card use, helping mortgage approval.
Can You Make Mortgage Payments With a Credit Card?
Lenders generally don’t accept cards for mortgage payments. But third-party services like Plastiq will process mortgage payments on your behalf for a 2% to 3% fee.
You can also earn cash back rewards to contribute toward monthly mortgage payments. But avoid carrying balances and interest charges.
Should You Use a Credit Card?
Before charging closing costs:
- Confirm policies on allowable card transactions.
- Inquire about convenience fees.
- Verify you can pay off balances before interest hits.
Given fees, restrictions, and potential interest charges, credit cards usually aren’t beneficial for closing costs or mortgage payments.
The Bottom Line
You typically can’t pay closing costs with a credit card directly. But some pre-closing fees may be chargeable depending on the lender and service provider. You’ll likely need a cashier’s check or wire transfer to pay the majority of costs.
Credit cards don’t offer enough credit for most home purchases. And sellers rarely accept them as payment. But cards can still help you earn rewards and improve credit to get a mortgage.
Overall, credit cards should be a limited option for financing a home purchase given the roadblocks and risks. Paying closing costs and mortgage bills with cash or financing through your lender are better alternatives.
Can you get closing costs waived?
But you can’t get your closing costs waived. You might be able to lower them or add them to your loan. Here are some options to explore when youre worried that closing costs might shut you out of homeownership.
What is included in closing costs?
Some of the closing costs buyers commonly pay include:
- Lender fees are the costs the lender charges you to get a mortgage loan. If you want to buy something, the lender will charge you a fee to check your credit. Also, if you buy discount points to lower your mortgage rate, the lender will add the cost of those points to the closing costs. Of course, lenders also charge an application fee, an underwriting fee, and an origination fee. You might be able to avoid some of these fees with some lenders, though. Ally Bank, for instance, doesn’t charge fees for application, origination, or underwriting.
- Annual Percentage Rate (APR): You can get personalized rates online for both fixed-rate and adjustable-rate mortgages.
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Types of loans
Conventional loans, HomeReady loan and Jumbo loans
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Terms
15 – 30 years
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Credit needed
620
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Minimum down payment
3% if moving forward with a HomeReady loan
- Title fees, including title search and title insurance. For a fee, your lender can hire a company to look through property records for any problems with the title, like a tax lien. The lender also wants the borrower to get title insurance in case any problems arise after the sale. This will help cover the cost of fixing any issues.
- Assessment fees, which pay for a professional to figure out how much a house is worth
- There are fees for home inspections that cover the services of the inspector checking out the condition of the house. You can choose not to have the inspection, but it’s still a good idea to do so so that you don’t have any expensive surprises down the road. Keep in mind that even though the inspection is part of the closing costs, you’ll likely have to pay for it before the closing.
- If you want a government-backed mortgage and don’t want to pay these costs at the same time as the loan, you may have to pay mortgage insurance premiums or something similar.
- Costs that have already been paid, like homeowners insurance, property taxes, and the interest on your mortgage that will build up from the closing date to your first monthly payment If you want to buy a condo, the Homeowners Association may ask you to pay a move-in fee and HOA fees ahead of time.
- Additional costs, which may vary depending on your situation. You might be working with a real estate lawyer, for instance, and you’ll have to pay for their help. If the house is in a flood zone, you may need flood insurance, and there will be a fee for determining and monitoring the flood as part of your closing costs. In some places, the buyer also has to pay transfer taxes.
While there are plenty of closing costs for the buyer to pay, the seller usually assumes responsibility for real estate agent commissions — both for the listing and buyers agents — transfer taxes and prorated property taxes, as well as some of the title insurance costs in some areas.
Can I Pay Closing Cost With Credit Card? – CreditGuide360.com
FAQ
Can I pay my closing costs with a credit card?
Generally, you cannot pay your mortgage closing costs directly with a credit card at the time of closing. Lenders typically require payment via wire transfer, cashier’s check, or certified funds.
What forms of payment are acceptable for closing costs?
Making a cash payment doesn’t mean you have to bring real money, but McBride said a cashier’s check or wire transfer would be better. Personal checks and credit cards are usually not accepted at closing.
Can you use your credit card during closing?
You can use a credit card while waiting for your mortgage to finalize. However, it’s a good idea to limit how much you spend and pay off the balance quickly. Making a large purchase on your credit card during the home closing process can jeopardize your mortgage approval.
Can I pay my house payment with my credit card?
Lenders don’t typically accept mortgage payments by credit card because they would have to pay a credit card transaction fee, which can be as high as 3. 5%. You’d also be paying a secured debt with an unsecured debt, possibly with a higher interest rate.