Can You Use Cryptocurrency for a Down Payment or Closing Costs on a VA Loan?

Cryptocurrencies are big business, with a global market cap of more than $2 trillion. As their crypto portfolios grow, more and more Veterans are looking to use these funds during the homebuying process.

Would-be VA buyers can use cryptocurrencies like Bitcoin and Ethereum to make a down payment or cover closing costs. But there are some restrictions, documentation needs and potential tax implications to consider.

Let’s take a closer look.

Tapping Crypto for Loan Costs

Some surveys suggest nearly 20% percent of Americans have invested in cryptocurrency. Introduced over a decade ago, Bitcoin remains the most well-known, but there are thousands of cryptocurrencies in circulation across the world.

When it comes to buying a home, qualified Veterans don’t typically need a down payment because of their VA loan benefit. VA loans also limit what buyers can pay in closing costs.

But Veterans can build equity from the outset with a down payment, and who pays what in closing costs is always a matter of negotiation with the seller.

Veterans can tap into their crypto holdings to come up with that down payment and to cover closing costs in a VA purchase. But you can’t just transfer some of your Bitcoin to a mortgage lender and call it a day.

Verifying assets is a key part of the underwriting process. Veterans will need to do a couple things in order for lenders to count digital currency as a legitimate asset.

The first step is turning that cryptocurrency into boring old U.S. dollars.

Verifying Crypto for VA Lenders

Because lenders won’t accept crypto alone, it needs to be converted into standard currency and then deposited into an account. Documentation is the other big piece with cryptocurrency and asset verification.

In short, the paper trail is critical.

Lenders need to see proof that you own the cryptocurrency, along with documentation about the deposit of funds once the crypto is converted to dollars. You might also need to provide a 30- or 60-day transaction history for the crypto account.

Cryptocurrency accounts don’t necessarily generate monthly statements like a bank. Veterans might need to provide screenshots of their account and transfer statements showing the crypto moving out of their account. Every buyer’s situation is different, and what underwriters and lenders need to see can vary by lender and other factors.

Liquidated crypto may also count toward qualifying income in some cases, though funds used for a down payment or closing costs are excluded from that calculation. Talk with your loan team early in the process if you plan to use cryptocurrency during your home financing experience.

You might also want to talk with a tax professional. There are some potential tax implications if you’re converting crypto into dollars, especially if you realized a gain. The IRS considers cryptocurrency to be property, not currency.