It’s income tax season and we’ve come up with five ways for you to use your tax refund to help with the purchase of a home.
The first way to use your income tax refund is to apply it towards your down payment. While there are a few 100% percent home buying options, most loan programs require the buyer to contribute between 3% and 20% of the down payment, with the average tax refund being around $3,000, this will cover a huge portion of that requirement.
Option two, closing costs. Closing costs are things such as appraisal, home inspection, lender fees, insurance, plus title and lawyer fees that are added on the house purchase. Using your tax refund to pay your closing costs could save you a lot of money over financing them into the purchase.
The 3rd option is paying down existing debt. You should try to be strategic when it comes to paying down your debt. The very best accounts to start on are those which are being paid to a finance company such as for appliances, furniture, guns, or jewelry.
Bank cards may also be a great area to lower your debt with respect to the balance to limit proportion. You want to ensure that the total amount is up to 30% or less of your maximum credit limit. Maintaining a lower balance actually helps your credit history.
The 5th option is to keep your refund money in the bank as extra reserves. Life loves to surprise you, and it never hurts to have some savings for when those problems pop-up. Plus, having extra money in the bank after closing is looked upon very favorably by mortgage lenders.
One last suggestion would be to use the money to pay for furniture. When you move to a new home, frequently you either want or need new furniture. So, rather than financing it and having additional debt, use your taxes return to pay for it in full.