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Having tried to buy a house with crypto — let me tell you! Prepare for a ride lol Basically, the easiest way to do it is to take a loan against it at a low in
by lettergram 5y ago
Having tried to buy a house with crypto — let me tell you! Prepare for a ride lol
Basically, the easiest way to do it is to take a loan against it at a low interest rate (as there’s collateral) and show you can pay the fees. If you’re buying a home you can use this as a down payment. Then sell the crypto and pay the loan. The main issue with banks is they need to track where your money comes from.
I made a mistake of selling my crypto and trying to use the money for a down payment on one of the properties I was interested in. That was a challenge to “prove” it wasn’t illegal gains. Part of KYC (know your customer) is understanding where their money came from and they aren’t a criminal / terrorist. Luckily, in my case I had other assets so I just shuffled around.
The loan method ensures they know where the money came from (the party lending you money).
- rmbyrro 5y agoAnd why doesn't KYC get in the way of offering crypto as collateral for a loan? If this was so simple and possible, every criminal would be laundering money this way, wouldn't they?
- ______-_-______ 5y agoUsually crypto-backed loans are made by crypto-focused companies. You can tell BlockFi (for example) you bought $100 of bitcoin 10 years ago and that's good enough for them. But Wells Fargo would require some actual documentation, and (probably?) not even accept crypto as collateral to begin with
- sofixa 5y ago> not even accept crypto as collateral to begin with Isn't crypto generally far too volatile to serve as collateral?
- notch656a 5y ago>they aren’t a criminal / terrorist. Is there a compelling reason why a criminal shouldn't be able to buy a house? Inconveniencing literally everyone over KYC, including non-criminals, to catch a 'criminal' who needs a place to live just seems absolutely insane. Go after people who you have probable cause have committed a crime, not ones you haven't.
- nrmitchi 5y agoThe issue isn’t that the buyer is a criminal, but that the source of funds is from (typically organized) criminal activity.
- notch656a 5y agoI don't understand how the 4th amendment would authorize such a search to be required without probable cause.
- refurb 5y agoWhat search? You have to declare the information or you don’t get the loan. It’s no more a “search” than the bank asking to prove your identity when opening an account.
- notch656a 5y agoThe lender is acting at the behest of the government when they follow KYC regulations. The 4th amendment specifically protects against this sort of search of your 'papers'. KYC is a search. It's a government requirement to have your papers searched-- akin to a policeman asking to see your papers before you get the loan. That's a search. --------------- >If you are stopped by the cops and they ask if they can search your car and you say “yes” then the search is valid. You are allowed to say “no”. They can force the search under certain circumstances. OK I say no and the policeman has no probable cause to search. What happens next? Am I allowed to continue my elective activity of going down the street, or can the policeman pull out a gun and tell me I'm going to jail if I continue to electively head towards my destination? I think you know the answer -- when I decline the search it has no effect on my elective ability to complete my task of continuing on the roadway. Returning to the loan, the analogy here is I would be allowed to proceed even after declining KYC search. >You are allowed to say “no”. Going back to your example of the cops stopping you, when I say no I'm eventually allowed to continue on my way. I'm not turned around and stopped from completing my elective activity. By your logic government could just pass a law that whenever you elect to leave your house, your constitutional rights are waved -- that's just ludicrous and defies reason for having them in the first place. You're not allowed to say 'no' to following the KYC search and keep on going -- It's a forcible search.
- ethbr0 5y agoMortgage lenders' underwriting processes have to be the stupidest thing I've ever interacted with. I once had someone challenge me as to why I had 4 bank accounts, so I can only imagine what they thought of crypto.
- s1artibartfast 5y agoYeah, one lender I worked with had tons of problems with small venmo transactions in and out of accounts. They wanted paper trial on the trivial funds back to a to a traditional bank
- datalopers 5y agoI tried to get a $500k mortgage a year ago. I had recently formed a new bootstrapped startup and wasn't taking a salary for myself, so I had no income. However I had 800+ credit score and a few million in liquid assets (not even crypto, just boring index funds) and could not get a mortgage whatsoever despite trying through multiple lenders. One even asked if anyone would be willing to cosign and suggested my parents. Ended up just paying cash.
- HonestOp001 5y agoThis is an important thing to note how rote the loans are. If you deviate from what “the system” asks of you, trouble ahead. The best recommendation here is to get chummy with a credit union leader, then you can find ways to break outside of this issue.
- anm89 5y agoYeah, I've learned this the hard way. Very true
- deleted 5y ago[deleted]
- wmf 5y agoI was in a similar situation and I got an investment line of credit instead of a mortgage.
- ericmay 5y agoConsolidate assets with a broker and then take out a pledged asset line loan is one way.
- tluyben2 5y agoYes, I had a very similar situation to you; startup (I took a salary though as we were profitable from day 1) and assets enough (nothing to do with crypto). Banks don't like any risk or differentiation of process; it is just easier to just say no. Even if you have the cash to pay for the house (which I did in my case); you can pay for the house in cash but the banks still, in some situations (like having a startup) they won't give you a mortgage (in my case, I knew I could get a far better interest rate for my money than the interest rate of taking a mortgage, so I didn't want to put my money in).
- mgraczyk 5y agoI believe most of the caution comes from the fact that the government is the largest buyer of the loan. The bank or your originator is not keeping the loan on it's balance sheet, and they will not be able to sell it unless it conforms to standard requirements.
- ilammy 5y agoUh... so that's how US is able to get these 30-year fixed-interest mortgages? Effectively, by having the government to be the actual lender here – while the banks are tasked with rubber-stamping on the risk assessment (“yup, looks like a standard loan to us”) and then raking in guaranteed, immediate profit after selling the loan and not caring about it anymore? (Well, unless they sell too many shitty loans, in which case they'd supposedly get their license revoked.)
- jonahbenton 5y agoNo...but I recommend The Big Short, which is highly entertaining, and also educational.
- ericmay 5y agoEh not so much “how they are able to”. At least as far as I know. But the banks have much more stringent regulations and verifications and aren’t just rubber-stamping loans anymore like they did before 2008. The rubber-stamping stuff has moved to crypto and stock exchanges.
- refurb 5y agoYes, the 30 year mortgage wouldn’t exist without government backing. But the government doesn’t hold the loans for long. If they conform they are bundled and sold off. The government will back the mortgages in the bonds indirectly if they fail (which is why they need to conform to certain standards). Well, that was the original Plan but with quantitative easing the federal reserve bought a lot of the bonds as well.
- mgraczyk 5y agoMortgage default rate in the US is extremely low, so empirically speaking I wouldn't worry about that. If anything the issue is that banks aren't able to lend to diverse borrowers, so you have to have income to get a loan, as is the complaint of the GP.
- NovemberWhiskey 5y agoIn my experience, lenders only care that funds are seasoned - i.e. that they've been in your account for a few months before the mortgage. They mostly care that the sourcing of those funds isn't some kind of temporary arrangement just to qualify for the loan.
- derekdahmer 5y agoI had the same problem with my first mortgage in 2020. Only the lending company didn’t tell me I couldn’t use the cashed out crypto funds until after I had already done the exchange. So I ended up generating a ton of capital gains tax on money I couldn’t even use. Funny that the US government had no problem believing the money was legit when it came time to pay taxes.
- jonahbenton 5y agoQuick note- IRS deliberately does not care about the criminal or non-criminal origin of income. All income in dollars from any source/activity is subject to tax. Brilliant, when you think about it.
- ilammy 5y agoPaying tax in and of itself is never illegal. Paying more tax than you owe is not illegal either. As far as taxes go, the only illegal thing is “not guessing the number right” and flat out refusing to pay. Obtaining money through criminal activity is a crime, but that's a different crime that does not have anything to do with paying taxes. It is a crime to knowingly accept money obtained through illicit activity, but guess what – the prosecutor for that crime is the government itself! You can't sue the government for unwillingness to prosecute.
- notch656a 5y ago>You can't sue the government for unwillingness to prosecute. No but selective enforcement could invalidate enforcement of the law, per equal protection clause of the 14th amendment.
- ninju 5y agoFound the IRS publication link: https://www.irs.gov/publications/p17#en_US_2021_publink1000172116 https://www.irs.gov/publications/p17#en_US_2021_publink10001...
- 5y ago
- s1artibartfast 5y agoWhy not buy in cash then get a mortgage after?
- xboxnolifes 5y agoRealizing gains from the sale.
- s1artibartfast 5y agoThey had already sold the coins