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Can You Buy a House With Ethereum The Basics of Buying a Home With Crypto

Can you buy a house with ethereum? This guide goes over the basics of buying a home with cryptocurrency and what to do ahead of time.

May 3, 2022
May 3, 2022
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Buying a house can be stressful, especially if you’re trying to save up for a down payment. But you don’t have to rely solely on your savings. You can sell other assets and use the proceeds toward your upfront homebuying costs, including Ethereum and other crypto assets.

Can you buy a house with Ethereum? Yes – if you sell the crypto first

You can buy a house with the money you earn from selling Ethereum. But you can’t buy a house with Ethereum in its crypto form – at least, not yet.

Although some companies are venturing into crypto-mortgages and blockchain loan transactions, most mortgage lenders do not accept cryptocurrency and require your down payment funds to be in USD.

So if you want to use Ethereum to buy a house, you’ll need to sell it first and then ensure that the funds are in an American bank account by the time you close on the home.

Now, if you are buying a house directly from the seller and the seller accepts Ethereum, you may be able to purchase it directly using crypto. But for the purposes of this article, we are referring to how you can use Ethereum to buy a home with a traditional mortgage loan.

The good news is that the documentation needed to use Ethereum profits to buy a home is similar to that of other asset sales, such as a car or boat. That means that your lender should be able to walk you through the process and keep you on track to close.

How to buy a house with Ethereum

Buying a house with Ethereum is similar to buying a house with other types of assets, though there are a few extra considerations to note.

Here are the steps you’ll generally need to take before you can use Ethereum to buy a house.

Step 1: Understand your closing timeline

Using Ethereum to buy a house is not something you can do last-minute. The Ethereum you plan to sell must be in a digital wallet, such as Coinbase, for at least 60 days prior to the sale. Your lender will ask for proof of ownership during the underwriting process.

Additionally, you need to ensure that the money from the Ethereum sale is in your U.S. bank account before you close on the home. To avoid delays, it’s best to sell the Ethereum at least two weeks prior to your closing date. That gives you some breathing room if it takes a few days for the sale to finalize and the funds to reach your account.

To recap:

  • The Ethereum must have been in your digital wallet for at least 60 days before you sell it
  • You should sell the Ethereum at least two weeks prior to your closing date to ensure that the funds are in your account

That means that if you are in the market for a house and you plan to use Ethereum profits toward your down payment, you’ll want to check the records in your digital wallet now to make sure you will meet the 60-day minimum ownership period.

If you just purchased the Ethereum, you will need to wait until the 60-day mark to sell it or find other sources for your down payment and closing costs.

Be sure to plan ahead for additional costs as well. You may owe transfer or conversion fees depending on the exchange you use. You don’t want to get caught off guard with additional payments, especially when you’re nearing the closing date on your house.

Step 2: Account for price fluctuations

Cryptocurrencies, including Ethereum, can be volatile. It’s up to you to decide when to sell so that you’ll have enough for your down payment. If selling today would give you enough money for the down payment but you want to hold out to see if the price increases, that’s a calculation you’ll have to make.

Sure, you could earn more if the price increases. But if it drops, you’ll have to find the funds elsewhere to cover your down payment or risk losing the home.

The choice is yours alone, but it’s important to research the risks and advantages, especially given your closing timeline.

Step 3: Be aware of the tax implications

When you sell an asset at a profit, the IRS may categorize it as income, even if it’s a digital currency. It’s a smart idea to talk to your accountant or certified financial planner about any tax implications from selling Ethereum, such as capital gains tax.

That’s not to suggest that you shouldn’t use Ethereum to buy a home if you find out that you will owe taxes on the sale of your crypto. But understanding the full picture will help you make the best decision for your finances and your goals, which is why it’s a good idea to work with a professional who can explain the implications to you.

Step 4: Keep a paper trail when selling your Ethereum

When you sell your Ethereum, keep a record of all your transactions. You’ll need to prove the source of the money you’re using to purchase your home. Acceptable forms of documentation include bank statements showing the money arriving in your bank account and records proving the Ethereum was in your digital wallet.

These records shouldn’t be too difficult to obtain, as your digital wallet will likely have a record of your cryptocurrency transactions. But ask your loan officer exactly what’s needed so you can organize the documents and submit them as soon as possible.

Want to skip some of the paperwork? Here’s a tip. Lenders have to source any large deposits that appear in your bank account in the two months leading up to your closing. Any money in the account prior to that time is considered “seasoned,” and you don’t need to provide documentation for it. If you decide to sell your Ethereum more than two months before you buy a house, you may not have to provide the ownership and sales records.

Learn more: How To Buy a House With Cryptocurrency

What if the seller is willing to accept Ethereum?

The above guidelines only apply if you’re looking to take out a home loan. If you’re buying a home directly from the seller, you may be able to buy a home directly with Ethereum. It could also work if you’re getting seller financing (when the seller gives you a private loan).

You’ll want to hash out the purchase agreement with the seller before signing on the dotted line. This includes arranging financing details and payment directly with the home seller.

For sellers who are comfortable with being paid 100% in Ethereum, you may be able to send the amount agreed upon from one wallet to another. If the seller wants to split payment between cash and some Ethereum then you’ll have to convert some of it into cash to complete the transaction.

Keep in mind even if the seller is fine with accepting Ethereum for the entire purchase, it may still be necessary to conduct some cash payments. For instance, government agencies like county records departments and third-party entities like title companies don’t accept crypto payments for the time being.

Bitcoin vs Ethereum for buying a house

Both Bitcoin and Ethereum are popular forms of cryptocurrency, with Bitcoin being the largest digital currency on the market.

Bitcoin and Ethereum are decentralized, blockchain-based currencies that have gained popularity in recent years. Because they are new currencies and not universally accepted or regulated by the federal government, they are more volatile than fiat currency (government-issued currency), such as the U.S. dollar.

Since most mortgage lenders do not accept cryptocurrency for your down payment or closing costs, neither is necessarily better or worse for buying a house. In either case, you’ll need to sell the asset and use the cash toward your home loan.

However, a growing number of crypto-enthusiasts and established financial entities are starting to believe Bitcoin has the potential to become a more widely used form of currency. Already, some retailers accept Bitcoin as a form of payment.

What this means is that Bitcoin could be seen as more legitimate (or has having the ability to retain its value) compared to Ethereum. Sellers may be inclined to accept Bitcoin more readily if you are purchasing a home from them directly.

But all of that is speculative, and for the time being, most home sales will be conducted with a traditional mortgage. And to use cryptocurrency toward that mortgage, you’ll need to convert it to cash, at least for the time being.

Learn more: Can You Buy a House With Bitcoin? Your 4-Step Guide to Becoming a Homeowner With Crypto

Can you buy a house with Ethereum? FAQs

Can I buy a home with Ethereum? Yes, if you’re purchasing a home directly with the home seller and they agree to this form of payment. Otherwise, you’ll need to convert your Ethereum to cash, especially if you’re taking out a mortgage with a traditional lender.

Does FHA allow cryptocurrency? No, FHA doesn’t allow a direct purchase with cryptocurrency. You can sell your crypto assets and use the cash proceeds from the sale toward your down payment on an FHA loan. But the crypto asset must have been in your digital wallet for at least 60 days prior to the sale.

Do mortgage lenders look at cryptocurrency? Mortgage lenders may look at your cryptocurrency as part of your assets when you apply for preapproval for a loan, if you are using your crypto assets to qualify. They may also look at your transaction records if you converted crypto to cash to make a down payment or pay for closing costs.

The bottom line

Although you cannot get a mortgage using Ethereum directly, you can sell your Ethereum holdings and use the cash toward your down payment and closing costs. For homebuyers struggling to save up a down payment otherwise, selling Ethereum could get them past the finish line and into a new home.

Key Takeaways:

  • You cannot use Ethereum toward your down payment for a house, but you can sell your Ethereum and use the cash from the sale
  • To qualify for a mortgage with Ethereum, you’ll need to have owned the Ethereum for at least 60 days prior to selling it
  • The funds you’ll use toward your down payment must be in U.S. dollars, so it’s a good idea to sell the Ethereum and transfer it to your bank account two weeks before closing
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