Smart Ways You Can Use Your Tax Refund To Buy A Home

A tax refund is one of the reasons why many people eagerly await tax season. As a result, they are vigilant about the approaching tax return filing deadline. To the federal government, personal income tax returns are due on April 15, sometimes known as Tax Day. Usually it occurs around the second week of April.

Just submitting your tax returns is only half the battle. The second part is optimising your tax refund. And putting it toward a down payment or closing costs on a property is one of the best uses of your money. First-time homebuyers and current homeowners alike have several options for using their tax refunds to help support the purchase of a property or increase their equity in their current residence.

Here are the top five methods to invest your tax refund towards a property.

1. Pay down debt

The interest rate that a mortgage lender offers you is based on a number of factors, one of the most important being your credit score. In order to improve your credit score for a home purchase, paying off high-interest credit card debt is a good place to start.

2. Down payment

The down payment is the initial payment made to the seller of a home. Your mortgage lender will supply the remaining funds for the purchase price to be paid to the seller. We have a mortgage down payment calculator that will help you figure out how much you'll need to buy the house of your dreams.

Bear in mind that private mortgage insurance premiums are normally required when the down payment is less than 20%. Lenders can rest easy knowing they won't lose money on a home loan thanks to private mortgage insurance.

3. Earnest money deposit

An earnest money deposit shows the seller that the buyer is serious about closing the deal. Earnest money deposits can be anywhere from one percent to three percent of the purchase price of a home, however the national average sits at two percent.

4. Home inspections

A potential buyer of real estate will typically pay for an inspection of the property's condition. This written report analyses a property and details any necessary or suggested maintenance, renovations, or other fixes. A house inspection is not the same thing as an appraisal, which establishes a property's worth.

5. Other closing costs

The fees we've discussed so far aren't the only ones associated with purchasing a home. Research the closing fees in detail, paying special attention to the ones you can bargain down.