Can You Use Your Credit Card on the Closing Date?

Overview of Closing Costs and Standard Payment Methods

A real estate closing marks the official transfer of property ownership, involving various financial transactions and expenses known as closing costs. These costs are fees charged by lenders, title companies, attorneys, and other third parties. They typically represent 2% to 5% of the home’s purchase price and cover services such as loan origination, title searches, title insurance, property appraisals, and recording of the deed.

For most closing costs, especially large sums like the down payment, standard payment methods are required for security and regulatory reasons. Wire transfers are a common and preferred method, allowing for the direct and immediate transfer of funds from the buyer’s bank account to the title or escrow company. Cashier’s checks, also known as certified checks, serve as another widely accepted payment option. These checks guarantee funds, as the money is drawn directly from the bank’s own account.

These payment methods are favored because they provide a clear, verifiable audit trail and ensure the immediate availability of funds. Federal anti-money laundering (AML) regulations also influence the preference for these secure and traceable transactions.

Credit Card Use for Closing Costs

Credit cards are generally not accepted for substantial sums in a real estate closing, such as the down payment or loan principal. Lenders and title companies avoid credit card payments for large transactions due to high processing fees, which can range from 1.5% to 3.5% or more of the transaction value. Large credit card transactions also carry an elevated risk of fraud and potential chargebacks, which could complicate the property transfer.

Regulatory concerns also limit credit card acceptance for major closing expenses. Mortgage transactions are subject to strict oversight, including anti-money laundering regulations, necessitating transparent and verifiable fund transfers. Allowing a down payment or other large closing costs to be financed through a credit card could introduce complexities in tracing the origin of funds and verifying their legitimacy. Lenders also typically prohibit using borrowed funds, like those from a credit card, for the down payment, as it could signal financial instability.

However, certain smaller closing costs might be payable by credit card, often directly to the service provider before the actual closing date. For instance, an appraisal fee, ranging from $400 to $700, could potentially be paid with a credit card directly to the appraiser. Similarly, home inspection fees, usually between $300 and $600, or pest inspection fees of $100 to $200, might be accepted by the inspection company via credit card. Credit report fees, often $30-$70, are also sometimes paid this way. These instances depend entirely on the individual vendor’s payment policies.

Many significant closing costs cannot be paid with a credit card. This includes the down payment and any portion of the loan principal. Escrow deposits, which fund future property taxes and homeowner’s insurance premiums for several months, are also not credit card eligible. Other non-negotiable cash expenses include title insurance premiums (0.5% to 1% of the loan amount), transfer taxes that vary widely by jurisdiction, and recording fees, typically $75-$250, all of which require secure, traditional payment methods.

Preparing Your Funds for Closing

Preparing funds for closing involves careful coordination to ensure all necessary money is available in the correct format on time. The initial step is to confirm the exact final amount required from your lender and closing agent. This information is detailed on the Closing Disclosure form, which federal regulations mandate be provided at least three business days before your scheduled closing date. This document outlines all loan terms, projected monthly payments, and the final list of closing costs.

Once the precise amount is known, you must arrange for the accepted payment methods well in advance. If a wire transfer is chosen, it is advisable to visit your bank or initiate the transfer through their secure online portal several days before closing. Verify the recipient’s bank details, including the ABA routing number and account number, by calling the title or escrow company directly using a phone number you have independently verified, not one from an email. Banks often have daily cut-off times for outgoing wire transfers, typically in the mid-afternoon, so timing is a consideration.

Alternatively, if a cashier’s check is the preferred method, you will need to obtain one from your bank. Some banks may have daily limits on the amount of a cashier’s check they can issue, which might range from $10,000 to $25,000, though larger amounts are common at traditional banks. Order the check a few days ahead of time to avoid any last-minute delays. Having funds ready and in the proper format ensures a smooth closing process and prevents any last-minute complications that could delay the transfer of property ownership.