This post is to recap the events that took place while purchasing my new house (on credit cards) and why I thought it was good at the time and how I feel about it after the fact.

At a Glance

When I decided to purchase my house on a credit card after my pre-approval got nerfed from the recent countrywide problems and they failed to come through on a loan, I took matters into my own hands. Here is are some of the things that ran through my mind while making this decision.

Pros

1. No Closing Costs from Mortgage
2. No Waiting on Banks
3. Almost No Paperwork
4. Payoff House Faster (my credit card interest rates were around the same as a house loan apr would be but since the payments weren't rear loaded with interest it would be equivalent to taking out a 6 year house mortgage)

Cons

1. Higher Payments than a Mortgage
2. Keep shifting Credit Card Balances to keep low rates

The Afterthought

Putting a house on a credit card was the best move I could make in the situation I was in. I was living with a relative after moving halfway across the country in cramped quarters and anxious to get my own house, in addition to that, the amount I paid for the house was the exact price it sold for 9 years prior, meaning the house is probably worth a bit more now. There were some things I did not think about before doing this purchase that I think everyone should take into consideration if they have a necessity to do this transaction ever in their lifetimes

Debt to Income Ratio

By placing a large sum of money on my credit cards the minimum payment was about 3x the amount it would have been using a mortgage. This caused my total monthly debt to fall out of proportion to my total income, meaning my debt was eating up over 42-48% of my total income, which most banks use as a guideline to give loans on. This resulted it an automatic denial for any type of loan I wanted to get from any bank where you couldn't talk to the decision maker yourself, which is very important because my original plan had been to refinance the house using a home equity loan and potentially drawing out more than the purchase price from the loan

FICO Score

The large sum of money on my credit cards also caused a drop in my FICO score by about 50points across the board which makes it even harder to get a loan. Because a lot of my credit cards were operating at more than 50% balance I lost a lot of points and the only thing that held my score up was the payment history, which is the biggest factor in calculating your credit score.

Summary

I was able to get a home equity loan on the house, but I had to go to several local banks and only when I spoke to the Vice President of one bank and explained my case, did I get approved for a loan. The amount of money that I was able to borrow was more than the price I paid. The bonus in this was that I got to conceal other debt I had from moving into a house loan and pay off a big chunk of my credit cards which will bring my FICO score and debt to income ratio back into line.

Using this method to purchase a home should be considered your last option unless you are familiar with creative financing and calculate all the risks out to the fullest. As you can see, even someone like myself who is considered very knowledgable in the area of creative financing, ignored some important points which could have made the process go smoother had they been taken into consideration.