Here’s a stupid question, but hear me out...

7 Replies

Hey everyone, I think I have a stupid question, but the more I think about it the better it actually sounds.

I’m looking to buy my first property and the only thing holding me back is a down payment that won’t completely drain my savings.

Here’s the dumb question - should I take a cash advance from a credit card for the down payment?

Generally speaking the answer is a hard no. But... I’m a veteran and I’ve applied the SCRA benefits to my credit card and my interest rate is capped at 4%, by law 6%, but my bank does 4%. If I took a cash advance out for the down payment the rate would be cheaper than an investment property mortgage rate.

So, what do I do?

Is this a crazy idea, or am I possibly on to something?

@Christopher Lane the mortgage company will ask and verify where the down payment is coming from. If/when they see it is a cash advance from a credit card that will be a huge red flag. They might not even be able to count that money towards the down payment.

Sorry if that ruins your plan. Also note that I am not a residential mortgage lender, so I’m trying to answer as best I can but if I’m wrong on some detail that wouldn’t be the first mistake in my life.

It sounds like you have some savings but don't want to deplete them. You could use those for the down payment and save the "cash advance" as your emergency fund and work hard to replace the savings. As stated above, most lenders don't want your down payment to be borrowed funds. The 4% sound pretty reasonable.

Regarding cash advances, many credit cards only allow about 5% to 20% of your credit limit to be taken as cash. And make sure your card's 4% would apply to advances. There may be some "fine print" you haven't read...

I wouldn't do it.  Keep the credit card for emergencies.  How close are you to having your down payment together?  If it is a house for you to live in, the amount needed for your down payment is lower than for a rental.

@Theresa Harris I have about $14k saved which is just enough for the down plus closing costs (assuming they’re about 4K) but I don’t want to completely destroy my savings.

Originally posted by @Christopher Lane :

Hey everyone, I think I have a stupid question, but the more I think about it the better it actually sounds.

I’m looking to buy my first property and the only thing holding me back is a down payment that won’t completely drain my savings.

Here’s the dumb question - should I take a cash advance from a credit card for the down payment?

Generally speaking the answer is a hard no. But... I’m a veteran and I’ve applied the SCRA benefits to my credit card and my interest rate is capped at 4%, by law 6%, but my bank does 4%. If I took a cash advance out for the down payment the rate would be cheaper than an investment property mortgage rate.

So, what do I do?

Is this a crazy idea, or am I possibly on to something?

Generally speaking it’s a hard no? Why? I’ve done a lot more traditionally “no-no”s in order to buy and grow my portfolio. Credit card. Loan shark. Pawn. Cashed out 401k. Used my property tax set-aside etc 


If it’s a good deal, do what you gotta do  

@Christopher Lane

You can do that, but it will be better to use your savings, and if you need more cash just then take the cash advance.

Also partnering up with another investor sounds great in this situation, you have half the risk, and you get to use the experience and knowledge, and you will not squeeze your funds to much. If it's a good deal it should be easy to find a partner in a local RE meet up or here on the bigger pockets, also a family member can be a potential investor/partner.

Good luck

Originally posted by @Christopher Lane :

@Theresa Harris I have about $14k saved which is just enough for the down plus closing costs (assuming they’re about 4K) but I don’t want to completely destroy my savings.

 If this is a house for you to live in, use the credit card as the emergency fund.  Look at houses and when you find one you want, see where you are at with your savings.   Presumably you are still saving and that money is growing.  For closing costs, you can also write that into the offer so the seller pays for some of those.