Closing costs can run thousands of dollars when purchasing a home. And coming up with the cash isn’t always easy. A natural thought is to charge closing costs to a credit card to delay the 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
Lenders and title companies typically don’t accept credit cards for closing costs. There are several reasons why:
Processing Fees
Credit card payments incur processing fees, which can be substantial for large closing cost transactions. 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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Balance Transfers – Transferring existing card debt to a lower rate card may help long-term affordability but 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?
While you cant get your closing costs waived, you may be able to reduce them or roll them into the 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, which are costs the lender charges you to create the mortgage loan. As a buyer, you can expect to pay a credit report fee for the lender to check your credit. And if youre buying discount points to lower your mortgage interest rate, the lender will include the price of those points in the closing costs. Lenders also generally charge an application fee, an underwriting fee and an origination fee. However, you might be able to avoid some of these fees with some lenders. For example, Ally Bank doesnt charge application, origination, or underwriting fees.
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Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
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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. A title search fee allows your lender to hire a company to check property records for any issues with the title, such as a tax lien. And in case some issues crop up after the sale, the lender also requires that the borrower obtains title insurance to help pay the cost of resolving any problems.
- Appraisal fees, which cover the cost of a professional appraiser determining the homes value.
- Home inspection fees, which cover the services of the home inspector evaluating the propertys condition. While you can opt to waive the inspection contingency, its wise to have your potential new home looked at to avoid any costly surprises down the line. Note that while the inspection is considered a closing cost, youll probably have to pay it at the time of service (which happens before closing).
- Mortgage insurance premiums or their equivalents, may be required if youre getting a government-backed mortgage and not rolling these costs into the loan.
- Prepaid expenses, including homeowners insurance, property taxes and the mortgage interest that will accrue between the closing date and your first monthly payment. If youre buying a condominium, the Homeowners Association may require that you prepay a move-in fee and HOA fees.
- Additional costs, which may vary depending on your situation. For example, you may be working with a real estate attorney — in this case, youll need to pay for their services. If the property is in a flood zone, it may require flood insurance, and your closing costs will include a flood determination and monitoring fee. In some areas, the buyer is also responsible for 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?
What forms of payment are acceptable for closing costs?
A cash payment does not mean you need to come with cold, hard cash, but McBride said a cashier’s check or wire transfer are the preferable forms of payment. 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.