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Why credit cards cannot be used in Real Estate transactions

On Behalf of | May 17, 2016 | Real Estate Transactions

  1. When a lender approves a mortgage loan, the approval is based on the borrower’s debt ratio during the home loan process. The lender approves the loan with the understanding that the borrower has the down payment and closing costs already available. Placing the closing costs and down payment on a credit card not only increases the borrower’s debt but also lowers the borrower’s credit score.
  2. The funds at closing are required to be guaranteed funds for immediate disbursement. Credit card companies reserve the right to pull back funds placed on credit cards for up to 90 days.
  3. Credit card companies charge a fee to the merchant for accepting credit cards. That fee would reduce the funds available for disbursement.
  4. For these reasons, the Delaware Real Estate settlement practice is to require wired funds into the attorney’s settlement escrow account with the understanding that a personal check for the difference up to $10,000 would be accepted to cover any extra costs that the wired funds do not meet.