Using Cryptocurrency (Video)
Cryptocurrency is becoming much more common as an asset. However, the anonymous nature of how cryptocurrencies are held and transferred among individuals presents challenges for the lending industry. In particular, it makes it difficult for lenders to comply with regulatory requirements requiring them to document the source of funds.
In this video Nick Kristoff discusses the use of bitcoin and other cryptocurrencies for down payment in the loan process.
UPDATE: Fannie Mae has updated their guidelines regarding cryptocurrency ("Virtual Currency"). Cryptocurrency that has been exchanged into U.S. dollars is acceptable for down payment, closing costs, and financial reserves provided the following are met:
- there is documented evidence that the virtual currency has been exchanged into U.S. dollars and is held in a U.S. or state regulated financial institution, and
- the funds are verified in U.S. dollars prior to the loan closing.
If a borrower has a large deposit into their bank account that originated from the exchange of virtual currency the lender will need to verify the funds originated from the borrower's virtual currency account.
Virtual currency cannot be used directly for a deposit (earnest money)on the sales contract.