Rack up rewards by charging homebuying costs

Appraisal, inspections, insurance, moving expenses are chances to score miles

Susan Johnston Taylor
Personal Finance Writer
Writes about credit card technology and savvy card use

Rack up rewards by charging home-buying costs

For most consumers, a home purchase is their single largest expenditure, so why not earn credit card rewards when paying a down payment, home inspection fees, moving expenses and other related bills that can run into the tens of thousands of dollars?

Holly Hartling started racking up rewards by putting her earnest money (the money paid in escrow to show you’re serious about purchasing that home) on a credit card. Another reason she opted for plastic? Speed.  

“Waiting for a check to go where it needs to go takes time,” she says. “I'm searching for a home in the Minneapolis area where every minute counts for home buying.”

Hartling paid off her card balance before interest started to accrue, which is what Casey Fleming, a mortgage adviser in California and author of “The Loan Guide: How to Get the Best Possible Mortgage,” recommends.

“You could do this to get the points, but don’t do it because you don’t have enough money to close the deal,” Fleming says. “If you’re really tight on the amount of money necessary to close, the lender would be unhappy to see you” charging these costs.

Not only could this throw off your credit score's debt-to-income ratio and make lenders wary of extending credit to you, but carrying a balance on your cards winds up costing you more in the long run. Rewards credit cards typically carry a higher interest rate than non-rewards cards, so any amount of interest you pay will likely cancel out the value of any rewards you accrue. 

Not all real estate agents, home appraisers and other vendors are set up to accept plastic, but here are six homebuying costs you may be able to pay via credit card.

1. Appraisal fee.
Lenders typically charge buyers an appraisal fee to have a professional appraiser evaluate the home and set its fair market value. Fleming says almost everyone pays this fee via credit card. 

“Most lenders should be able to accommodate that,” he says. Costs vary depending on where you are in the country, but Fleming says this fee is often around $500, give or take. 

2. Home inspection.
To ensure that you’re not buying a money pit fraught with maintenance problems, a home inspection is a must. And depending on your home inspector, you may be able to pay with plastic. 

“As a mobile service business, I do accept credit cards and over 90 percent of my customers choose to pay that way,” says Scott Brown, owner of Brightside Home Inspection in Syracuse, New York. “Most folks seem to have their credit card in their pocket or purse but aren’t too sure where their checkbook is.”

Mobile or online payments via credit card are not only convenient for Brown’s customers but also for him. “It alleviates me from going to the bank five days a week just to deposit checks,” he adds. 

If you also need a pest control inspection, a survey or a pool inspection, see if those vendors will accept plastic, too.  

 

Video: 5 Tips before buying a house

3. Real estate lawyer fees.
Some states require a real estate lawyer to close transactions, while others use escrow agents and title companies. If you’re using a real estate attorney to draw up paperwork to ensure that your interests are protected, ask if you can pay by credit card.

Fees for real estate lawyers vary depending on geography and the complexity and dollar amount of the transaction, but they can stretch into the thousands. 

4. Homeowner’s insurance.
If you’re taking out a mortgage on a home, your lender will likely require you to take out homeowner’s insurance to protect both your interests in the property. 

“Your annual insurance premium is usually a pretty big nut,” says Fleming.

Most insurers will let you choose to pay monthly or annually, but you’ll need proof of insurance to close.

5. Moving expenses.
Whether you’re renting a moving truck or hiring movers to transport household items, you can typically pay by credit card.

“You could do this [charge homebuying expenses] to get the points, but don’t do it because you don’t have enough money to close the deal.”

Some premium credit cards offer car rental insurance when you pay for the rental using that card. However, moving truck rentals may be excluded, so check with your auto insurer to see if it will cover you or offer you a supplemental insurance policy. 

As for paying a moving company with a credit card, you may have some additional protections if your mover makes off with your belongings or commits fraud, but the rules are less clear when it comes to damage.

Pay with plastic to get the points but do your homework to ensure that you’re dealing with a reputable mover.  

6. HOA dues or HOA certification. 
If you’re buying a house or a condo in an area that has a mandatory homeowner’s association, you may need to budget for fees associated with that.

“Usually the association will charge you money for producing a condominium certificate,” Fleming says. In some cases, you might be able to pay the certification fee or HOA dues with a credit card rather than paying for it in escrow. 

When you’re all settled in at your new address, you may have amassed enough points to pay for your next vacation. Or at maybe a fire pit for the patio.

Hartling was a little more modest with the rewards she earned from charging her homebuying costs. What did she buy with her points? “A couple sets of bed sheets and a rice cooker on Amazon!” she says. “I know the algebra doesn’t bear out, but it’s fun to buy things with AmEx points converted to Amazon dollars.” 

See related: 5 steps to get your credit ready for a mortgageHow going tiny (house) can downsize debt


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Updated: 11-17-2017