Tax filing season is upon us again. A silver lining to completing that return is getting good news about a refund. This extra money could literally open the door to a new home. If you happen to be one of the fortunate, then your next decision is what to do with the refund.
The average taxpayer refund is about $3,000. This could be your ticket to buying now rather than in the future. Regardless of how much you receive, you can use it towards a down payment or to pay upfront closing costs.
Most buyers are under the impression that they need a 10 percent down payment to buy a home. Actually, it is much less because if you use a low-down-payment mortgage. There are VA and USDA mortgages that allow for no down payment for qualified buyers. FHA has a 3.5 percent down payment program and FNMA and Freddie Mac have 3 percent down payment mortgages for qualified creditors as well as 5 percent down programs.
Closing costs for originating new mortgages can easily range from two to three percent of the purchase price. Most lenders will allow the seller to pay part or all of them based on the agreement in the sales contract. If you are using one of these loan vehicles, your tax refund could be used to pay closing costs.
For practicality, if you get a refund, get it deposited directly into your account. It is necessary to be able to trace the source of the funds. Getting a refund check and cashing it adds an unnecessary aging requirement.
You may also already have saved the money for your down payment and closing costs but have other debt that keeps you from qualifying for a mortgage. Your tax refund could be used to pay down that debt. However, I do suggest you consult with a trusted mortgage professional before paying off the debt.
An average refund may not cover the full down payment on a median-priced home, it will help. Your refund could make it a simple as 1-2-3 to get into a home.
- Get the hard, cold facts for the homes and mortgages in your area and price range.
- Get pre-approved with a trusted mortgage professional.
- Start looking at homes.
Just imagine if you added the COVID-19 relief check to your tax refund. You would have a nice down payment.
I can provide Insider Information on Fairfax VA homes for sale. Get you a FREE Market Snapshot Report of Your Northern Virginia Home’s Value, or Search All Northern Virginia Homes For Sale. Put that data you need at the tips of your fingers!