Providing documentation of bitcoin revenue for a house purchase

[btcprice]

Has anyone used their bitcoins/cryptocoins as proof of equity for the down payment on a house? Many of us had a good appreciation in our cryptocurrency investments during 2013 and will be looking for tax write-offs if we sell in 2014.

I just went to a mortgage broker and had to present all my equity to show that I won't be borrowing the down payment. I provided him documentation of my balance at the exchange I use. He said I would need 2 months worth of statements from the exchange in order to qualify for the loan as proof that I didn't borrow the money and have to pay it back.

Has anyone else used their cryptocurrency as a down payment? If so, how did the mortgage underwriter view the balance at the exchange you use? Were there any questions as to the validity of your equity?

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[ProfMac]

Has anyone used their bitcoins/cryptocoins as proof of equity for the down payment on a house? Many of us had a good appreciation in our cryptocurrency investments during 2013 and will be looking for tax write-offs if we sell in 2014.

I just went to a mortgage broker and had to present all my equity to show that I won't be borrowing the down payment. I provided him documentation of my balance at the exchange I use. He said I would need 2 months worth of statements from the exchange in order to qualify for the loan as proof that I didn't borrow the money and have to pay it back.

Has anyone else used their cryptocurrency as a down payment? If so, how did the mortgage underwriter view the balance at the exchange you use? Were there any questions as to the validity of your equity?

The two (2) month requirement also exists for a straight fiat purchase.  It is not because of bitcoin.

[btcprice]

Has anyone used their bitcoins/cryptocoins as proof of equity for the down payment on a house? Many of us had a good appreciation in our cryptocurrency investments during 2013 and will be looking for tax write-offs if we sell in 2014.

I just went to a mortgage broker and had to present all my equity to show that I won't be borrowing the down payment. I provided him documentation of my balance at the exchange I use. He said I would need 2 months worth of statements from the exchange in order to qualify for the loan as proof that I didn't borrow the money and have to pay it back.

Has anyone else used their cryptocurrency as a down payment? If so, how did the mortgage underwriter view the balance at the exchange you use? Were there any questions as to the validity of your equity?

The two (2) month requirement also exists for a straight fiat purchase.  It is not because of bitcoin.

Agreed. I was wondering how the loan underwriter would view the cryptocurrency as equity. Would that person be less likely to count it as equity since it was so volatile? Are there other reservations the underwriter might have because they are unfamiliar with this type of investment?

[casascius]

I think it's a reasonable argument that you would have no reason to leave funds in an exchange for 2 months.  How long did you have the bitcoin?  I would be willing to bet that if you simply screenshotted your bitcoin client showing you held those bitcoins for 2 months, that might be all it takes to get them off your back.  If you have anything that could serve as evidence of when you originally bought them and how, that can't hurt either.

The fact that they're volatile shouldn't matter, because you've already sold them and locked in a firm final price.  All that matters, from the sounds of it, is that you can give them enough documentation to persuade a 3rd party that these funds are likely to be yours, free and clear, if they are ever challenged.

Also... Did you say your balance is in an exchange?  I wouldn't be pledging any balance in an exchange until I had it out.

[btcprice]

I think it's a reasonable argument that you would have no reason to leave funds in an exchange for 2 months.  How long did you have the bitcoin?  I would be willing to bet that if you simply screenshotted your bitcoin client showing you held those bitcoins for 2 months, that might be all it takes to get them off your back.  If you have anything that could serve as evidence of when you originally bought them and how, that can't hurt either.

The fact that they're volatile shouldn't matter, because you've already sold them and locked in a firm final price.  All that matters, from the sounds of it, is that you can give them enough documentation to persuade a 3rd party that these funds are likely to be yours, free and clear, if they are ever challenged.

Also... Did you say your balance is in an exchange?  I wouldn't be pledging any balance in an exchange until I had it out.

Thanks for the feedback.

I originally bought them at the end of November but I moved them from one exchange to another in between that time and of course I've kept them in my wallet for the most part. I provided a balance at the mortgage company by printing in the format of Microsoft XPS Document Writer which saves it as an xps file extension. I then converted it online from xps to pdf. I would hope that balances shown 2 months apart would be enough.

[Bob Derber]

Profcon - is the 2 month requirement some regulation or law or is this likely a rule being applied by the underwriter.  If it is a regulation, is there a copy somewhere to help btcprice see what the underwriter is looking to to confirm that the bitcoins existed and that btcprice owned them during this period?

btcprice - your mortgage broker (or lender if you are going direct) should provide you with some guidance on what the underwriter requires or wants to approve the loan.  The broker hopefully has the experience to approach the underwriting department directly and ask what can work or to give them a better understanding of bitcoins so they appreciate the data you have provided.  It is quite possible the underwriter doesn't understand the system or that you need to escalate to an underwriting manager who might.

There's so much less flexibility in the market these days.... I wish you luck.

Please share how this goes.... there will be several others in the same circumstance soon enough.....

[ProfMac]

Profcon - is the 2 month requirement some regulation or law or is this likely a rule being applied by the underwriter.  If it is a regulation, is there a copy somewhere to help btcprice see what the underwriter is looking to to confirm that the bitcoins existed and that btcprice owned them during this period?

I just know that when I did a re-finance on my house the 2 month requirement was in place.  I don't know the underlying authority for it.

[btcprice]

Profcon - is the 2 month requirement some regulation or law or is this likely a rule being applied by the underwriter.  If it is a regulation, is there a copy somewhere to help btcprice see what the underwriter is looking to to confirm that the bitcoins existed and that btcprice owned them during this period?

btcprice - your mortgage broker (or lender if you are going direct) should provide you with some guidance on what the underwriter requires or wants to approve the loan.  The broker hopefully has the experience to approach the underwriting department directly and ask what can work or to give them a better understanding of bitcoins so they appreciate the data you have provided.  It is quite possible the underwriter doesn't understand the system or that you need to escalate to an underwriting manager who might.

There's so much less flexibility in the market these days.... I wish you luck.

Please share how this goes.... there will be several others in the same circumstance soon enough.....

My mortgage guy said the 2 month statement requirement was what an underwriter would ask for.  He mentioned that as long as there was proof that it wasn't a loan it should be good enough. I think the underwriter wants to see equity that doesn't have to be paid back (like a loan from someone) that would be an extra burden of monthly payment in addition to the home loan.

My exchange doesn't give out statements so I'm thinking a screen capture for 2 months would be good enough.

My major concern was whether the underwriter would not consider such a risky investment as cryptocurrency as proof of equity.

[Bob Derber]

I assume you have moved the bitcoins to USD so I don't think the underwriter would be very concerned with the risk aspect and I suspect you are spot on in suggesting the underwriter wants to make sure it is your money going in to the down payment and not a loan from someone else. 

If the BTC is to prove a net worth for some reason the underwriter might not consider a current position in BTC feeling that it is too risky - I could see that happening now... however, you might note that Silicon Valley Bank is doing BTC deals today.

By the way, btcprice, if you are looking for a tax deduction keep in mind that using your BTC for a down on a house may be treated for tax purposes like selling the BTC - if you have a large gain it may create taxable income that you are not thinking about..... just a thought.  Check with your accountant if you haven't already......

And in any event - hope you like the home!

[mel2000]

...if you are looking for a tax deduction keep in mind that using your BTC for a down on a house may be treated for tax purposes like selling the BTC - if you have a large gain it may create taxable income that you are not thinking about..... just a thought.

How could a home down payment from BTC profit be anything other than a taxable gain (in USA)?

[btcprice]

I assume you have moved the bitcoins to USD so I don't think the underwriter would be very concerned with the risk aspect and I suspect you are spot on in suggesting the underwriter wants to make sure it is your money going in to the down payment and not a loan from someone else. 

If the BTC is to prove a net worth for some reason the underwriter might not consider a current position in BTC feeling that it is too risky - I could see that happening now... however, you might note that Silicon Valley Bank is doing BTC deals today.

By the way, btcprice, if you are looking for a tax deduction keep in mind that using your BTC for a down on a house may be treated for tax purposes like selling the BTC - if you have a large gain it may create taxable income that you are not thinking about..... just a thought.  Check with your accountant if you haven't already......

And in any event - hope you like the home!

Actually, I asked the mortgage guy if I should move to dollars and he said no because the underwriter wouldn't know whether it was an investment or a loan. However, I feel even if I did convert from BTC to dollars that I could still show a record of my BTC purchases and the subsequent cashing out to dollars.

[btcprice]

...if you are looking for a tax deduction keep in mind that using your BTC for a down on a house may be treated for tax purposes like selling the BTC - if you have a large gain it may create taxable income that you are not thinking about..... just a thought.

How could a home down payment from BTC profit be anything other than a taxable gain (in USA)?

This is a good question and one I hadn't fully explained. A down payment (in the US) is NOT eligible for a tax deduction. My main concern was in qualifying for the loan with my BTC as equity.

The reason I wanted to buy a house with my new-found wealth was to get the tax break on the interest throughout the year. I'm sure my tax accountant will have me use a few other tax breaks such as a Roth IRA to help me keep some of my money.