First-time home buyers are selling crypto to fund down payments — here’s what to know before you do it


Many Americans are using their tendies to tap into the American Dream — and the trend doesn’t show signs of stopping.

Nearly 12% of first-time buyers indicated that selling cryptocurrency holdings contributed toward building a down payment for a house, according to a survey conducted by Redfin RDFN, -1.22% in the fourth quarter of 2021. That’s up from 8.8% of buyers surveyed in the third quarter of 2020, and 4.6% of novice home buyers in the third quarter of 2019.

For comparison, that’s roughly in line with the share of first-time buyers who relied on a cash gift from family for their down payment. Meanwhile, 52% of first-time home buyers said they grew their down payment by saving money earned through their paycheck.

“Crypto is one way for people without generational wealth to win a lottery ticket to the middle class,” Redfin chief economist Daryl Fairweather said in the report.

Redfin noted that cryptocurrencies could become a bigger driver of down-payment savings, as millennials and Gen Zers dominate the housing market. Those buyers are also more likely than older investors to invest in cryptocurrencies such as bitcoin BTCUSD, -1.36%, ethereum ETHUSD, -2.64% and Dogecoin DOGEUSD, -4.55%.

But as home buyers who rely upon their crypto earnings to fund their home purchase may be finding, the process isn’t always straightforward. One such buyer — software engineer Terrance Leonard — told MarketWatch last spring that investing in crypto made buying his dream home feasible.

“Without investing in crypto there would have been no way that I would have been able to buy this at the time when it came on the market,” Leonard, who lives in Washington, D.C., told MarketWatch.

However, as he discovered, converting crypto into a down payment was somewhat of a challenge. He couldn’t simply transfer over the crypto investments or show his account balance on Coinbase COIN, +0.79% to satisfy the lender and title company’s need for a proof of funds. As a result, he needed to cash out his crypto investment into a bank account, like someone might do with money earned in the stock market.

Meanwhile, the mortgage industry is grappling with the need to update lenders’ software and processes to account for this increasingly popular asset.

Lenders typically will request a paper trail, demonstrating a 30- to 60-day transaction history for the crypto account. But, as Veterans United Home Loans noted in a blog post, cryptocurrency accounts don’t always provide monthly statements as a bank would. Consequently, many lenders will expect borrowers to cash out their crypto investments early in the process.

“You can’t pay your closing costs with a Van Gogh — it’s the same with your bitcoin,” Chris Birk, director of education at Veterans United, told MarketWatch. “It’s going to have to be converted, it’s going to have to be seasoned, and there’s going to be documentation to satisfy the lender.”

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