Can you Put Closing Costs on a Credit Card? [Legally] 


Think about this scenario: your offer on your dream home has been accepted and you’re ready to take on that mortgage. But wait, after all the documents have been signed you find out you have to pay what are called closing costs. These are completely normal and a part of any real estate transaction. So before you reach for your wallet you might be wondering: can you put closing costs on a credit card?

Generally, the answer here is going to be no. As you might know, closing costs can be as much as 3-4% of the price of the home. This means you’ll likely be playing in the thousands or even the tens of thousands of dollars. Given that credit card payments aren’t guaranteed, they want the closing costs to be paid by something that is backed by actual assets. 

The closing costs are not really a good or service that you can just charge to your credit card. These can basically be looked at as legal fees that need to be paid in cash or a cash equivalent. Anyone can pay with a credit card that they have no intention of paying off. Because of this, banks require payment by a more substantial method.

Can You Pay For Real Estate Closing Costs on Credit?

Now you might have picked up on the fact that I said ‘generally, the answer is going to be no’. In the United States, certain mortgage companies like Fannie Mae do allow things like closing fees to be paid on a credit card. To do so, the borrower must provide proof that they have sufficient and liquid funds, as well as a credit card limit that is high enough to take on these high-priced costs. It might not be recommended, but for some people, it is an option. 

The easiest way to pay closing costs is through a certified cheque or bank draft in Canada. These costs do require you to save some money that could otherwise be going toward your downpayment. But such is life in the real estate market. In the United States and Canada, these closing costs are unavoidable and often catch buyers by surprise. 

So if you are thinking of buying a house, always be prepared for those closing costs. Even though most places will likely not accept a credit card to pay for these closing costs, here is a quick list of pros and cons I came up with to help you make the decision for yourself!

The Pros and Cons of Putting Closing Costs on a Credit Card

Pros of Putting Closing Costs on a Credit Card

What exactly would the benefits be of being able to put closing costs on a credit card? Well, for one thing, you wouldn’t need to necessarily have cash on hand. This could really come in handy if the closing costs catch you off guard. We all know how easy it is to charge something to a credit card and being blindsided by closing costs of $5,000 or even $10,000 can add another layer of anxiety to an already stressful process.

Let’s talk about another obvious benefit of using a credit card: points or cash back. That’s right, if you could put a $10,000 closing cost on your credit card, you could get a massive number of reward points that would take the edge off of such a big cost. If you own a cash-back credit card that paid 3% back on purchases, you could be getting back $300.00 just for using your card. Every cloud has a silver lining and using your credit card can provide additional benefits that make it easier to stomach those darn closing costs. 

One last thing about using a credit card: it would save you from taking another trip to the bank. If you want to use a bank draft, you’ll have to go to a teller and get one created. This can also incur additional costs if your bank charges for these orders. Wouldn’t it be nice if you could just bring out your credit card and make that swipe instead?

Cons of Putting Closing Costs on a Credit Card

As for the cons, it’s pretty straightforward. The worst part about putting closing costs on your credit card is also providing proof that you have those liquid assets handy. This might require a trip to the bank anyways, in which case you might as well just save the hassle and pick up a cashier’s cheque or bank draft while you are there.

One more problem? Your credit card could get rejected or locked out if the card provider deems this to be a suspicious or out-of-the-ordinary purchase. It’s not every day we pay for closing costs so your credit card transaction might not even go through. There’s a reason I don’t really recommend you use your credit card for payments like this!

The Bottom Line: Can you Put Closing Costs on a Credit Card?

Given how popular credit cards are as a payment method these days, it’s not surprising that people want to use them for things like real estate closing costs. They are easy and I know that personally when I am about to make a big payment, I look to see how many points or cashback I can earn from it.

So when you’re about to pay for your closing costs on a house, most of the time a credit card won’t even be accepted. If it is, then think about how beneficial it actually is since you’ll have to prove you have the funds to cover that transaction. For most of us, it will be less of a hassle to just go pick up a bank draft instead. I hope this helped!

Geek, out.

Noel

Noel is the founder and main contributor for his blog - Noel's passion for personal finance has helped him amass over 600k readers to his Financial Geek blog.

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