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You’ve been working on your savings and dreaming of that moment when you finally have the keys to a place that’s truly yours. You might not realize that your tax return could give you a little extra cash to help you get there sooner. As Freddie Mac notes:
“ . . . your tax refund from the IRS can be a useful supplement to your homebuying budget.”
So, if you’re getting a tax refund this year, you can use it to help you 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 more money back in their refunds than last year. While it’s not a significant increase, the visual below uses data from the Internal Revenue Service (IRS) 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 will vary. But when buying a home, any extra cash can help move things forward. Here are a few examples of how you can put that money to good use, according to Freddie Mac:
- 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 reach your goal faster. Just remember, it’s typically not required to put 20% down.
- Pay for closing costs – Closing costs include fees for the appraisal, title insurance, and loan underwriting. They’re generally between 2% and 5% of the home’s total purchase price. So, putting your refund toward these costs can make things more manageable on closing day.
- Lower your mortgage rate – Your lender might allow you to buy down your mortgage rate. If you qualify for this option, you could pay up front for a lower mortgage rate. It may be worth exploring if your affordability is tight at today’s rates and home prices.
But you don’t have to figure it all out on your own. Working with a team of trusted real estate professionals who understand the homebuying process, what you need to save, and any resources you can tap into will help ensure you’re ready to buy when the time comes.
Bottom Line
When saving for a home, every dollar gets you one step closer to your goal. While your tax refund may not be enough to change the game, it can help boost your homebuying fund.
What would having your own home mean for you or your family this year? Let’s discuss it, and we’ll devise a strategy for success.
