Lenders accepting Bitcoin as down payment on home purchases

Exotic mortgage volume fell 30% in 2020. Now, they're are roaring back.

By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | March 27, 2021

In March 2020, the exotic mortgage world froze up as the COVID-19 pandemic crept across America.

Aggressive, creative, outside-the-box mortgages, like those that count bank statement deposits as income, were suddenly dust in the wind.

But government-sponsored mortgages like those from Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Affairs Department continued full-steam ahead.

Mortgage origination volume hit an all-time high of $4.3 trillion in 2020, compared with $2.5 trillion in 2019, according to Black Knight.

Yet, exotic mortgages (a.k.a., non-qualified mortgages) plummeted to $37.3 billion in 2020, down from $52 billion in 2019, according to Inside Mortgage Finance.

Fast forward to March 2021. This so-called non-qualified mortgage space has come roaring back and is more aggressive than ever. Can you say Mr. Toad’s Wild Ride?

As of this week, you can use Bitcoin or any cryptocurrency (which, mysteriously, is unregulated and lacks a central authority) to buy anything from your starter home to your palatial palace — without any thought about how you propose to come up with the monthly house payment.

No income documentation for you. We are talking about a minimum down payment of 25% on loans as big as $3 million.

Just cough up your Bitcoin or other recent cryptocurrency statement and call that good for your down payment, along with settlement charges and cash reserves. You will have to liquidate that Bitcoin into cash and wire it to escrow before closing, however.

In contrast, Fannie Mae does not recognize Bitcoin or any other digital currency unless it was previously converted into U.S. currency and deposited into an eligible asset account and previously seasoned for at least two months. Fannie also requires a paper trail showing that funds from the cryptocurrency account were previously owned by the borrower.

To get this non-qualified loan using Bitcoin, however, you only need to have a middle FICO score of 700 or better when putting 25% down – or a middle score of 660 or better when putting 45% down. Other than that, it’s little more than a fog-the-mirror loan.

Rates for this mortgage start in the mid-5% range.

The down payment, closing costs and any required cash reserves can all come from a gift, be it from cryptocurrency, stocks or cash.

Here are some other eye-popping, exotic-loan honorable mentions:

• A loan for a self-employed borrower who prepares his or her own 12-month profit and loss statement. No bank statements are required, and the 20% minimum down payment can come from gifts.
• A loan for a 1099 independent contractor without accompanying tax returns. Any heavy-duty tax write-offs are not counted against you.
• Mortgages for borrowers currently in forbearance.
• Loans on rental property without having to qualify with as little as 20% down, so long as future rents will be at least 75% of the mortgage payment.
• A loan with just 10% down using average bank statement deposits for a year to show income.

Freddie Mac rate news: The 30-year fixed-rate averaged 3.17%, 8 basis points higher than last week. The 15-year fixed-rate averaged 2.45%, 5 basis points higher than last week.

The Mortgage Bankers Association reported a 2.5% decrease in mortgage application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $548,250 loan, last year’s payment was $100 more than this week’s payment of $2,362.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with 1-point cost: A 15-year conventional at 2.125%, a 30-year FHA at 2.375%, a 30-year conventional at 2.75%, a 15-year conventional high-balance ($548,251 to $822,375) at 2.25%, a 30-year conventional high-balance at 3% and a jumbo 30-year fixed at 2.99%.

Eye catcher loan of the week: A 15-year fixed-rate at 2.25% without points.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.