Tax Refund=Downpayment for a Home

Tax Refund=Downpayment for a Home

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Filing taxes is dreadful for most people. What if you are going to receive a tax refund this year? Have you thought about what you can do with that money?

It doesn’t matter how much you get back from your taxes. If you are thinking about purchasing your own home, you can deposit the money into your home fund. Using that money as part of a down payment for your home is a superb idea. If you have more money saved, you only have less to acquire from lenders.

If you find it difficult to save on your own, you can go ahead and make changes to your federal income tax withholding exemption from one to zero. Your employer will be mandated to pay a larger portion of your pay to the IRS. This will make your income tax refund significantly bigger.

What You Get and What You Need

A tax refund can contribute significantly to your down payment for a home, especially if you are planning to use a loan that’s FHA-insured. This would be no problem since you just need 3.5% of the total price of the home. If you are going for the conventional method of financing, you should still accumulate enough funds to add to the FHA loan.

Usually, lenders consider 20% of the total price of a home as the optimum down payment. Unfortunately, many people do not have that kind of money to spare. It’s a good thing the Federal Housing Administration loans just require 3.5% down payment.

Getting Pre-Approved

It’s always a challenge to find a lender who wants to make things easier for your pre-approval and can still offer good mortgage rates. If you give 20% down payment, it erases the mortgage insurance. Even if you only pay 10%, it would still give you improved interest rates and better negotiating power.

A Good Thing

People feel good when they get money back from the government. In truth, the government just receives excess payment without interest. Because of this, putting your money in a savings account is more fruitful than just collecting your refund at home. When you’re ready to make that down payment, the money you’re saving from your tax refund will be very handy.

Do You Need to Receive your Tax Return to Be Pre-approved for a Home Purchase?

It’s good news for everyone that you can start the pre-approval process even if you haven’t received your tax refund yet. You can tell your loan officer how much money you expect to get as your tax refund. The amount gives the officer the chance to use the specific amount as a starting reference for the pre-approval of your mortgage. File your taxes earlier so that you can get your refund immediately.

Cliff Johnson