Identification

• Credit card checks are cash advances on your available credit card limit. They must be repaid, the same as with a credit card purchase, but they do not come with a grace period, as purchases do. Interest accrues on them the minute the transaction is complete. And there are typically fees attached to cash advances, as much as 2 to 4 percent, according to Bankrate. Advances also come with a higher interest rate. Many credit card companies apply payments toward lower-rate purchase balances before the higher-rate cash advance balances. The credit card issuer must by law supply the exact amount of rates or any fees associated with a cash advance.
  
  

Considerations

• The FHA is very particular about the source of any down payment funds. Since the minimum is so low, it wants to be sure that the money comes from or belongs to the borrower. These funds must be verifiable, and the borrower must supply the appropriate documentation to identify the source. FHA does not permit any type of loan as a source for the down payment. This includes credit card cash advances. If the lender later discovers that the down payment came from a borrower's credit card cash advance, it is considered loan fraud.
  
  

Verification

• Besides requiring two months of bank statements from the borrower for the account holding the down payment funds, FHA guidelines ask the lender to contact the bank holding the funds. The lender's loan processor sends a Verification of Deposit (VOD) to the bank to verify the information on the bank statements. If there are any large deposits that are out of character with the rest of the account history, such as a credit card advance, or are too large to realistically come from a legitimate source such as income, the FHA requires an explanation with backup documentation.
  
  

Gift Funds

• The only way a credit card cash advance can be used as an FHA mortgage down payment is if the advance is from a close relative's credit card. The FHA allows relatives, employers, unions and charitable groups to give gift funds to a borrower for use as down payment. The gift funds can come from a loan taken out by the giver. However, the borrower cannot repay any money used as gift funds. The giver must sign a document that states the borrower has no repayment obligation.
  
  

Credit and Debt

• Even if a borrower takes the money as a cash advance and leaves it in a savings or checking account for a few months prior to applying for an FHA loan, the advance would show up on the borrower's credit report as a debt. Significantly increasing the amount of money owed on a credit card can lower a credit score. It also increases the amount of monthly debt carried vs. monthly income, which is carefully examined by an FHA lender as a factor for loan approval. If the ratio of debt to income is too high, the borrower risks loan denial. The FHA guidelines require that total set monthly debts, including the new mortgage payment, should not exceed 43 percent of qualified gross monthly income.