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March 02, 2016

3 Ways Your Tax Refund Can Bring You Closer to Homeownership

Homeownership
3 Ways Your Tax Refund Can Bring You Closer to Homeownership

Almost 40 million tax refunds worth nearly $125 billion have been issued as of February 20, according to the IRS. The average refund is $3,120. So far, more than 8 out of every 10 filers have already received a refund this year. If you’re one of them, here are 3 ways yours could bring you closer to homeownership:

Save for a down payment. Saving for a down payment is one of the biggest barriers to homeownership. But today’s homebuyers persistently overestimate the size of the down payment they need. Depending on your credit history and other factors, many borrowers can expect to make a down payment of about 5 to 10%.  With Freddie Mac’s Home Possible Advantage® 3% down mortgage, it could mean a down payment of as little as $6,000 for a $200,000 home for qualified borrowers.

Down payment assistance programs can also help you bridge the cash gap – there are hundreds of millions of dollars available! A great place to start is right where you live. Many state, county, and city governments provide financial assistance for people in their communities who are well qualified and ready for homeownership.

Pay for closing costs.  The average closing costs were $1,847 in 2015, 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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