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When it comes time to buy a house, most of us don’t have a down payment sitting around in cash. Our money is often tied up in stocks, retirement accounts, or increasingly, cryptocurrencies. Turning those assets into cash usually means selling, and triggering a hefty tax bill, too.

A new type of mortgage is trying to change that, at least for crypto holders. Created by lender Better Home & Finance and crypto exchange Coinbase, the first "token-backed conforming mortgage" will let buyers pledge Bitcoin or USDC holdings instead of a cash down payment.

The idea could be as big a deal for crypto as it is for housing — if the establishment buys in. Post-pandemic, buying a house is less affordable than it’s been in decades, and Gallup polling shows one in seven U.S. adults own crypto. Expanding the ways people can qualify for a home loan could bring more buyers off the sidelines.

“This would show how far crypto has come,” said Dylan Stigliano, general manager of crypto at SoFi. “What was once a highly speculative experiment could now be mainstream enough to finance one of the hallmarks of the American dream.”

The mainstream play

Using investments to secure a mortgage isn't an entirely new concept. Milo, a Miami-based lender, has offered a fully crypto-backed mortgage for affluent buyers since 2022. (Its CEO told the Wall Street Journal it has “more than 100 customers” – so, a pretty niche product.) And in traditional markets, investors sometimes use a securities-backed loan as a short-term bridge — typically to close on a new home before selling their old one.

What’s new here is the potential scope: The Better Home loan targets mainstream buyers – younger people who may have significant crypto holdings but limited cash savings. And more importantly, it’s designed to conform to the guidelines of Fannie Mae, the guarantor of trillions of dollars in U.S. mortgages.

That means it will have “significantly lower interest rates” than other token-backed mortgages, according to Better Home. (Fannie Mae buys conforming mortgages from lenders, reducing their risk and freeing them up to make new loans. In fact, in justifying its higher rates last year, Milo pointed specifically to the absence of an institution like Fannie Mae willing to purchase Bitcoin-backed loans.)

To be sure, Fannie Mae hasn’t said it will purchase Bitcoin-backed loans. As Mortgage Professional America reported, Fannie Mae hasn’t officially embraced the Better Home product, and it’s unclear how such a volatile asset type would change the mortgage giant’s risk calculus.

But the regulatory backdrop here is important: Last June William Pulte, director of the Federal Housing Finance Agency, announced that he’d ordered Fannie Mae and Freddie Mac, another guarantor, “to prepare their businesses to count cryptocurrency as an asset for a mortgage.” That directive, along with the more crypto-friendly posture of the current presidential administration, could pave the way for broader adoption.

“Fannie Mae’s exploration of crypto-backed mortgage concepts is drawing attention across both housing and financial markets, highlighting how emerging asset classes could intersect with traditional mortgage lending,” the National Association of Mortgage Underwriters wrote last week. “While still in early-stage discussion, the idea reflects a broader push to modernize underwriting approaches and expand the range of assets that may be considered in qualifying borrowers.”

Still, Better’s product raises questions about how far that integration can realistically go.

The fine print

The structure will let buyers keep their crypto positions in a custodial account. At closing, borrowers will actually take out two loans: a standard mortgage on the home and a loan secured by their crypto to cover the down payment.

Better Home will combine both loans into a single monthly payment at the same interest rate and amortization term — a feature that sets it apart from previous crypto-backed lending arrangements. Although Better Home won’t require any additional collateral if the crypto drops in value, a significant overcollateralization will be required to account for its price volatility.

In the case of Bitcoin, you’d have to pledge $250,000 of it to borrow $100,000. And if your wealth is already heavily concentrated in crypto, using that same position to back your mortgage effectively doubles down on that exposure. That's worth thinking through carefully.

So what?

Crypto-backed mortgages sit at a crossroads. They’re credible enough to attract a major lender and crypto exchange. But we don’t yet know how they would fit into the broader regulatory framework that underpins most U.S. home loans. And even if that’s determined, it’s unclear how broadly popular such a product would be in the near term.

Still, each time crypto finds a foothold in a new regulated corner of finance — ETFs, retirement accounts, and now, potentially, a more mainstream type of mortgage — the question shifts. Less about whether digital assets belong in the system; more about how much risk that system is willing to absorb. This product may be an early test of that boundary.

Related Reading

Should you use crypto to buy your new home? (ABC News)

Could crypto-backed mortgages put the US housing market at risk? (CNBC)

Crypto at Your Bank, Explained (SoFi)

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