February 12, 2015

3 Ways Your Tax Refund Can Bring You Closer to Homeownership

Tax Refund - Closer to Homeownership

The IRS says it has already received more than 14 million tax returns through January 30th. The average federal tax refund so far? $3,539. Over the course of the next few months, nearly 8 out of 10 filers will get a refund. Here are three ways yours could bring you closer to making your dream of homeownership a reality.

Save for a down payment. Saving for a down payment is one of the biggest barriers to homeownership. In fact, 50 percent of renters surveyed said they were going to continue renting over the next three years because they could not afford a down payment.  But today's consumers persistently overestimate the size of the down payment they need. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 to 10%. And new 3% down financing options for qualified borrowers could mean a down payment as little as $6,000 for a $200,000 home.

Pay for closing costs.The average closing costs are $2,539, but they can vary widely depending on where you live. See where your state stacks up and understand your costs.

Lower your interest rate.You can pay discount points to buy down your mortgage interest rate. A "point" equals one percent of the loan. It's essentially an upfront interest payment to lock in a lower interest rate on your fixed-rate mortgage.  So if you are borrowing $200,000, paying one discount point would mean paying $2,000 upfront at closing – but it may end up saving you more in interest payments over the life of the loan. See how paying extra points might lower your rate.

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