Cryptocurrency and FHA Mortgage Insurance

 In Common Questions, Qualifying for a Mortgage

We have two pieces of news for you today.  One is about whether you can use cryptocurrency as an asset when qualifying for a mortgage, and the other is about FHA mortgage insurance. Here’s what you need to know.

What is cryptocurrency?

Cryptocurrency is a digital currency, meaning there is no physical bill or coin.  It is secured by cryptography, making it difficult to counterfeit.  These digital assets are increasing in popularity as an investment option.  Bitcoin is the most familiar cryptocurrency, but as of early 2021, there are more than 4,000 different types of cryptocurrency.  

Is cryptocurrency an acceptable asset for mortgage qualification?

Cryptocurrency is an acceptable asset when applying for a mortgage, but there are certain requirements that must be met.  Here they are.

For conventional loans being sold to Fannie Mae, cryptocurrency must be converted into US currency and deposited into an eligible asset account.  The borrower must provide documentation showing ownership of the cryptocurrency account.

For conventional loans being sold to Freddie Mac, the same rules apply, and the borrower must also provide proof of the length of ownership of the cryptocurrency account.

For FHA loans, the cryptocurrency must be converted into US currency, and deposited into an eligible checking/savings account, and the original deposit into the cryptocurrency account must be sourced (must show where the money used to set up the account came from).

For VA loans, the rules are the same as they are for FHA loans.

These rules exist because criminals (drug dealers, human traffickers, etc.) regularly use cryptocurrency, and lenders are not allowed to use assets derived from illegal activities when qualifying borrowers for a mortgage.

And now for some FHA mortgage insurance news.  

On March 30, HUD Secretary Marcia Fudge announced that there is no plan to lower the premium for FHA mortgage insurance, despite the fact that the insurance fund has more money than required by Congress.  She said there are too many FHA borrowers experiencing financial hardship due to the pandemic to lower the premium at this point.  

If you have questions about these, or any other mortgage-related topics, or if you need to be pre-approved for a purchase or refinance mortgage, contact us today.  We will show you how easy it is to get approved for a mortgage.

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