Buying a home on a credit card may seem outrageous and unfeasible. But, in some areas, it’s becoming a very real possibility. While taking out a traditional loan is almost always a better choice, buyers who cannot qualify due to issues such as self-employment may be able to purchase discounted properties using plastic.

Here’s how it’s being done:

1. Potential buyers find a property that fits their budget and credit card limit. Believe it or not, quality one bedroom condos in gated communities around Vegas can be had for under 30k. We’re talking granite counter tops and fireplaces.

2. The buyer takes out a cash advance using a high-limit credit card. Using the above example, a buyer might want to put $10,000 and take out a $20,000 cash advance. They make sure that the cash advance has low initial fees and a low for-life interest rate (i.e. many cards are now offering cash advance interest rates at 6%).

3. The buyer makes a cash offer on the property with a low bid because desperate sellers want the financing security cash offers bring.

4. After closing on the deal, the buyer will pay back the cash advance much sooner than a 30-year mortgage. However, because the purchase price was so low to begin with, the monthly payments are similar to rent in the area.

Note that this creative financing strategy can be risky and I’m not advocating that everyone should whip out their cards on a whim. If you miss a monthly payment (even by a couple days), your credit card interest rate could skyrocket 3x or more.

However, buying low-cost homes on a credit card is a legitimate creative financing technique that a growing number of buyers are using in areas like Vegas.

See Also:

Seller Financing

FHA Loans

Tags | creative financing, credit card financing, Las Vegas