Some 12 percent of first-time buyers said that selling cryptocurrency helped them save for a down payment on a house, according to a survey by Redfin RDFN, +0.47 percent in the fourth quarter of 2019. From 8.8% in the third quarter 2020 and 4.6% for first-time homebuyers in the third quarter 2019, that number has gone up.
In contrast, that’s approximately in line with the proportion of first-time buyers who received a monetary gift from relatives for a down payment. Meanwhile, 52% of first-time house buyers said they increased their down payment by saving money from their paychecks.
In the research, Redfin head economist Daryl Fairweather said, “Crypto is one route for those without hereditary wealth to win a lottery ticket to the middle class.”
As millennials and Gen Zers dominate the housing market, Redfin believes cryptocurrencies will become a major driver of down-payment funds. These consumers are also more likely to invest in cryptocurrencies such as bitcoin BTCUSD, -0.22 percent, ethereum ETHUSD, -0.63 percent, and Dogecoin DOGEUSD, 6.24 percent than older investors.
However, as house purchasers who depend on their crypto profits to pay their home purchase may discover, the procedure isn’t always simple. Terrance Leonard, a software engineer, told MarketWatch last spring that investing in cryptocurrency enabled him to purchase his dream house.
“There would have been no way for me to acquire this at the moment it came on the market if I hadn’t invested in crypto,” Leonard, who resides in Washington, D.C., told MarketWatch.
However, as he realized, turning cryptocurrency into a down payment was quite difficult. He couldn’t just transfer his crypto assets or present his Coinbase COIN, -1.07 percent account balance to fulfill the lender’s and title company’s requirements for proof of money. As a consequence, he needed to pay out his crypto investment into a bank account, much as someone would do with stock market profits.
Meanwhile, the mortgage sector is wrestling with the need to upgrade lenders’ software and procedures to account for this growing asset.
Lenders will often ask for a paper trail that shows a 30- to 60-day transaction history for the crypto account. However, as Veterans United Home Loans pointed out in a blog post, bitcoin accounts do not usually give monthly statements like a bank. As a result, many lenders will anticipate that borrowers would cash out their crypto assets early in the process.
“You can’t pay your closing expenses with a Van Gogh, and you can’t pay your closing costs with bitcoin,” Chris Birk, director of education at Veterans United, told MarketWatch. “It’s going to have to be converted, seasoned, and there’ll have to be paperwork to satisfy the lender.”