You’ve been working on your savings and dreaming of that moment when you finally have keys to a place that’s truly yours. What you might not realize is that your tax return could give you a little extra cash to help you get there sooner.
So if you’re getting a tax refund this year, you can use it to help pay for some of the upfront costs that come with buying a home, like the down payment and closing costs. And here’s the best part.
On average, people are getting even more money back in their refunds than they did last year. While it’s not a big increase, the visual below uses data from the internal Revenue Service to show the average individual’s refund is 3.9% higher this year.
Of course, how much money you may get in your tax refund is going to vary. But when it comes to buying a home, any extra cash can help move things forward.
How to put the money to good use
- Save for a down payment – Saving for a down payment can be one of the biggest hurdles for buyers. Setting aside your tax refund for this expense could help you get to your goal faster. Just remember, it’s typically not required to put 20% down.
- Pay for closing costs – Closing costs include fees for things like the appraisal, title insurance, and underwriting of your loan. They are generally between 2% and 5% of the total purchase price of the home. So, putting your refund toward these costs can make things more manageable on closing day.
- Lower your mortgage rate – Your lender might give you the option to buy down your mortgage rate. If you qualify for this option, you could pay up front to have a lower rate on your mortgage. If affordability is tight for you at today’s rates and home prices, this may be worth exploring.
But you don’t have to figure it all out on your own. Work with me because I understand the homebuying process, what you need to save, and any resources you can tap into that will help you make sure you are ready to buy when the time comes.