How to Use Your Tax Refund to Buy a Home
For some, tax season is a dreaded time of the year, but if you’re one of the lucky ones receiving a sizable tax return, you may feel as excited about tax time as you do about getting an end-of-the-year bonus from your boss. Whether you’re receiving a couple hundred or several thousand dollars, it’s a good opportunity to consider using your tax refund toward buying a home. It may sound incredible, but it is possible. Following tax tips for home buying success isn’t as far-fetched as it may seem. It does require some planning, but — especially if you’re a first-time homebuyer — you can turn a small windfall into a large purchase. There are a number of programs that offer incentives for you to purchase your first home.
Down Payment Basics
For certain loan products, such as an FHA loan, you only need 3.5 percent of the loan as a down payment. Other loans don’t require any down payment. You can finance the entire loan if you qualify for a:
- VA loan
- USDA loan
In general, the more you’re able to put down on your home, the less you have to borrow. So here are valuable tax tips for home buying: if you were planning on using your tax refund to make a big purchase, use it to help you make the biggest purchase of your life: a home. What better use of that money is there?
Comparing Tax Refunds and Down Payments
In 2015, the average refund for personal tax returns was $3,120. Meanwhile, the average deposit needed for an FHA loan down payment was $6,615. If you were already saving up for a down payment, you can get nearly half of what you need just by following these tax tips for home buying.
Some financial planners recommend that you view taxes as a forced saving plan. But while it feels good to get this money back from the government, keep in mind that they made interest on it. So, use it for something special, like the thousands of Americans who choose to spend their tax returns on a down payment for a home.
Tax Tips for Home Buying
Before you buy your first home, you must complete several preliminary steps to give yourself the best chance of success. These tax tips for home buying include:
- Make sure you have a good credit report. This is one of the first things your loan officer checks. You may find out that you lack the things that contribute to a good score. Knowing this before you get too involved in the home-buying process allows you to take measures to improve your credit score before you start.
- File your taxes ASAP. Filing early is a good idea because your return time is significantly shorter. The earlier you file, the faster you get your tax returns.
- Find assistant programs. Especially if you’re purchasing your first home, look into government programs and community mortgages that can save you money.
- Compare lender quotes. With independent mortgage lenders like Zack Adam of Prime Mortgage Lending, Inc. (dba PrimeRate Mortgage Lending), you have options you may not have with other lenders. Talk to a lender like Zack who can help you get started and point you in the right direction.
Using these tax tips for home buying can put you in your first home, assuming your credit’s good and you’re getting a healthy tax return. And don’t forget there are tax advantages to owning a home! Take advantage of this opportunity; contact Zack at 828-348-1907 to learn more.