Pros And Cons Of House Purchasing Through Credit Card

You may be surprised to hear the idea of purchasing a house with credit card. But, it is possible in some cases and is also lucrative. Have you heard of bad debt vs. good debt? A bad debt includes financing purchases like TVs, cars, or vacations etc. while a good debt is purchasing something that gives you return, like education. There is another thing that can give you return i.e. real estate. So, why don’t invest in that through your credit card.

However, there are some pros and cons which you should know before purchasing a house through credit card.

Pros of Purchasing House with Credit Card

You came across a house which costs less than your credit limit and also which you liked. Acquiring it through your credit card means you don’t have to engage into the mortgage process. There are many benefits of that.

1. No Mortgage Fee

When you initiate the mortgage process, you have to a serious of additional fees which increases the total cost. Making the purchase through credit card will skip the application fees and closing costs.

2. No Lengthy Paperwork

Mortgages these days involve lot of forms to fill and even more documents to send. While, in the credit card, there is no paperwork as the lender in this case is not involved.

3. Speedy Payoff

In majority of cases, one gets to pay off the debt faster as compared to mortgage or loan. As you do not have to pay the interest that constitutes a big portion of the initial installments of your monthly mortgage payment.

Cons of Purchasing House with Credit Card

Here are the cons of purchasing a house through credit card.

1. Low Credit Score

The amount you are indebted of on an outstanding credit card balance comprises 30% of your FICO credit score. When you make a hefty purchase through your card, you will have large outstanding balance on your credit card dropping your credit score. It would make it difficult to secure another loan in the future.

2. Debt-To-Income Ratio

If you acquire the house through credit card, your monthly payments are going to be three times higher than the mortgage payments. It will result in a high debt-t-income ratio making it difficult to qualify for loans or additional credits in future.

3. Maxed Out Credit Card

Making a huge purchase can max out your credit card. Not only that it is a bad thing itself, it can have additional consequences too. It will reduce your credit limit, lower your credit score and add to your debt limit.

4. Heed A Professional

There are many people who advice against using credit card to purchase a house, while some give a go ahead in this regard. There are several cases where it is prudent to purchase through credit card, while in some cases it is not. So, just hire the service of a professional who will give you detailed information regarding why or why not you should purchase the house with credit card.