Can You Buy a House With a Credit Card for Points?

Purchasing an entire house directly with a credit card to earn points is generally not possible. Real estate transactions involve significant sums and specific payment methods that typically exclude direct credit card use. However, credit cards can be used for various home-related expenses, allowing for point accumulation on ancillary costs rather than the primary home purchase.

Direct Home Purchase with a Credit Card

Buying a house directly with a credit card faces substantial barriers. Credit cards have daily or single transaction limits far below the cost of a home, which can range from hundreds of thousands to millions of dollars.

Beyond transaction limits, real estate transactions are not structured to accept credit card payments for the full purchase price. Sellers, title companies, and escrow agents require certified funds, such as wire transfers or cashier’s checks, to ensure the money is guaranteed and immediately available. Accepting a credit card for such a large amount would also incur substantial processing fees for the merchant, often 2% to 3% of the transaction value, which is prohibitive for real estate professionals.

Credit card companies often restrict using cards for real estate down payments or full purchase amounts. Cash advances typically have lower limits than the overall credit limit, high fees (often 3% to 5%), and immediate interest accrual at a higher annual percentage rate (APR).

Using Credit Cards for Home-Related Expenses

Before purchasing a home, several costs can often be paid with a credit card, including appraisal fees and home inspection fees. Appraisal costs typically range from $300 to $500, while home inspections generally cost between $300 and $500. Mortgage application fees and credit report fees are also common expenses that some lenders or third-party services may allow to be paid by credit card.

During the closing process, most significant costs like the down payment, title insurance, and large escrow fees must be paid via wire transfer or certified check. However, smaller, specific closing costs might be payable by credit card if the vendor accepts this method. This could include certain legal fees, recording fees, or specific service charges where the amount is relatively minor.

Once a home is acquired, credit cards can be effectively used for moving expenses, such as hiring movers, purchasing packing supplies, or even for temporary housing during the transition. Many credit cards offer bonus categories for expenses like groceries or home improvement, which can align with initial furnishing or minor repair costs. New purchases like furniture, appliances, or renovation materials can also be charged to a credit card, providing opportunities to earn rewards.

Some municipalities and utility providers accept credit card payments for property taxes and utility bills. These payments often come with a convenience fee, typically ranging from 2% to 3% of the transaction amount, which needs to be weighed against the value of the points earned.

Third-Party Payment Processors

Third-party payment processors offer a method to use a credit card for expenses where direct card acceptance is not available. These services, such as Plastiq, function by allowing you to pay them with your credit card, and they then remit payment to the recipient via check or bank transfer. This can enable credit card payments for categories like rent, mortgage, or certain vendor invoices that typically do not accept cards.

These services charge a transaction fee for their convenience, which is typically around 2.5% to 2.9% for credit card payments. This fee must be carefully considered against the value of the points or rewards earned. For example, if a credit card offers 1% cash back, a 2.9% fee would result in a net cost rather than a benefit. However, if the points are highly valuable or if using the service helps meet a spending requirement for a significant sign-up bonus, the fee might be justified.

While these processors expand credit card payment options, they have limitations. Not all recipients accept payments from these services, and there can be delays in payment delivery, typically 5 to 10 business days for checks. Specific scenarios where these services might be used in home buying include paying an earnest money deposit if the seller or agent allows it, or covering certain invoices from contractors or service providers involved in the home purchase or renovation. It is important to confirm acceptance with the payee and assess the fee’s impact on the overall value proposition.

Financial Implications of Large Credit Card Balances

Using credit cards for substantial expenses carries notable financial considerations. If a large balance is not paid in full by the due date, significant interest charges can accrue. The average annual percentage rate (APR) for credit cards can range from approximately 20% to over 28%, and interest begins immediately if the balance is not paid.

A high credit card balance also impacts one’s credit utilization ratio, which is the amount of credit used relative to the total available credit. Lenders view a utilization ratio above 30% negatively, and maintaining a lower ratio, ideally below 10%, is generally preferred for a strong credit score. A decline in credit score due to high utilization can affect future borrowing opportunities, including mortgage rates or approval.

Accumulating high-interest credit card debt can undermine financial stability. It can lead to a cycle of minimum payments, with a large portion of each payment going towards interest rather than principal. High credit card debt directly influences an individual’s debt-to-income (DTI) ratio, a key metric for mortgage lenders. Lenders typically prefer a DTI ratio no higher than 36%, though some may approve loans with a DTI up to 43% or even 50% for certain government-backed loans. A high DTI ratio can make it more challenging to qualify for a mortgage or secure favorable interest rates, potentially limiting homeownership options.