You pay all of your other bills with your credit card, so it makes sense to assume that you can pay your mortgage with a credit card. However, it can be difficult to find companies that will accept debt-for-debt payments. Whether you are allowed to pay your mortgage with a credit card will depend on several factors:
- Terms of the Card Issuer
- Mortgage Lender
- Credit Card’s Network (Visa, Mastercard, American Express, or Discover)
Paying a Mortgage with a Credit Card Obstacles
In order to be able to pay your mortgage with a credit card, your card network, issuer, and the mortgage lender will all have to tell you that this can be done. Each of these factors will have its own set of rules.
Some card networks, such as Visa and Mastercard may allow you to use debit or credit cards for mortgage payments.
However, some card issuers don’t allow mortgage payments. Bank of America credit cards cannot be used to make a mortgage payment.
In some cases, as long as the mortgage lender agrees to accept payments via a certain credit card, then you can pay with a certain card. Not all mortgage lenders will allow you to make a payment this way, but they may accept payments that are processed by a third-party payment service provider.
Before attempting to pay your mortgage with a credit card, it’s best to check with all three parties to ensure that your payment will process. You never want to run the risk of a late or declined payment.
Consider These Factors When Paying a Mortgage With a Credit Card
Before you buy your home, it’s important to make sure that you get a loan that you can actually pay off. A credit card might come in handy every now and then, but you should always make sure that you can afford your house. Consider these factors before determining whether or not to pay your mortgage with a credit card.
Fees and Rewards
If you get rewards for credit card use, it may be tempting to pay your mortgage with a card. However, you have to consider the processing fee. After a fee, it might not be in your best interest to use a card just for the rewards.
Your mortgage payment is going to show up on your statement as the most significant expense. This means costly interest charges if you happen to miss a credit card payment.
Putting your mortgage on a credit card will take up a significant amount of your credit limit, which can lower your overall credit score until payment is made.
Should I use a credit card to pay my mortgage?
After you have considered all of these things, it’s up to you to make the decision that’s in your best interest. At the very least, now you know that you may have an additional method for paying off your loan.
Your Home Loan
Whether you’re using a credit card to pay off your mortgage, it’s important that you consider the type of mortgage you have. Many people don’t know about Non-QM loans and how buying a house can be made easy.
What is a Non-QM Loan?
Non-traditional mortgages or non-QM loans is a loan that does not meet the standards of the federal government after regulatory reforms passed in 2009 and 2010.
Many people believe that non-QM loans are higher risk loans. However, this isn’t true. Non-QM loans simply don’t follow the traditional loan definition. They are designed to offset some of the risks.
Why Non-QM Loans Matter
These loans can have a term that is more than 30 years because some people cannot afford a 30-year mortgage and require an extension. Lenders want to get more buyers and offer Non-QM loans with financing up to 40 or even 50 years. These lenders do take on higher risk, so it’s required that the borrower come up with a higher down payment and have a good or better credit score.
What You Need to Know About Non-QM Loans
Non-QM loans have the following characteristics.
No Excessive Fees
The fees cannot exceed 3% of what was borrowed.
Limits on Debt-to-Income (DTI)
DTIs may be higher if there are compensating factors, such as higher down payment and cash reserves.
No Tax Returns Required
Tax returns are not required for these types of loans. However, they are helpful in securing any type of loan. For non-QM loans, you will need 12 months of bank and investment account statements.
Examples of a Non-QM Loan
Loans of all types are confusing, especially ones that not many people know about.
Interest-only loan. This loan is offered by some mortgage lenders and is generally offered to higher-income borrowers.
Alt-Qm asset. This non-QM loan does not require the borrower to have a regular income, but he or she must have made investments and liquid cash to make payments.
Alt-QM income. This loan is for the type of borrower who is self-employed and can prove at least two years worth of steady employment history.
The Ability to Repay Rule
The ability to repay rule is absolutely critical. It requires that the lender makes an effort to ensure that the borrower has the ability to repay a loan according to the terms of the agreement. The creditor must follow underwriting requirements and verify the borrower’s financial information.
This rule is a requirement of all mortgages and includes:
- Purchase loans
- Home equity loans
- First and subordinate liens
Under this rule, the mortgage lender must take the following considerations into account:
Current Income and Assets
The lender must look at the assets and income of the borrower and the joint applicant.
The lender considers the borrower’s current employment, which proves the financial availability to repay the loan.
The lender will look at the full monthly payment for the property, which includes insurance, principal, interest, and property taxes.
The mortgage company will also consider any and all debts that the borrower owes, including credit cards, cars, student loans, and other loans.
Debt to Income Ratio
The DTI varies based on the type of loan, but the lender will verify what the DTI is.
The lender will review the credit history of the borrower. The score required will depend on the type of program, and the interest rate offered.
Do you think that you would benefit from a non-QM loan? Contact us today.