It’s officially tax season! You know what that means? If you’re looking to buy a home and will be receiving a tax refund, then you’ve found yourself at an opportune time. Whether you’re looking to buy your first home or a second property, homeownership may be closer than you think, as you may be able to apply your tax refunds towards a down payment.
According to the Internal Revenue Service (IRS), Californian’s can expect an estimated average refund of $3069 when filing their taxes this year. This is more than the American average. Given that such programs as the Federal Housing Authority, Freddie Mac, and Fannie Mae, allow for as little as 3% down (for many first-time buyers), your refund can cover a major portion of your down payment. Furthermore, if you’re a Veteran, you may be able to purchase a home with 0% down (so your refund can be applied towards other expenses, such as paying down debts and improving your debt-to-income ratios).
In short, if you’re purchasing a home, you don’t need to necessarily save the 20% many assume is required for a down. In fact, your tax refund may cover more of a down payment than you ever thought possible. In California, for example, considering the median home sale price, the average tax refund may cover 20% of a 3% down payment.
On another note, if you’re purchasing a second home and are shy of putting together the necessary down payment, don’t lose hope. With a few budgeting techniques, ideas for additional income streams, and/or researching additional down payment programs – you can take care of the first step in buying a home (saving for a down payment), faster than you think.
Furthermore, if you are planning on financing your purchase, during this stage of the home buying process, you should pull (and if necessary, clean) your credit score. You’d be surprised the number of programs available for borrowers with poor credit scores, however, by cleaning up debts and negative reports, you may be able to get approved for better loan programs. Which brings me to my next point, if your debt-to-income ratio is a bigger obstacle than saving for a down payment, you may wish to use your tax refund on paying down some of your debts.
However, before deciding which debts to pay, contact me so we can see what is the best strategy for your situation to make homeownership possible. Additionally, I can’t stress enough, getting a pre-approval is highly recommended as it will not only let us know what you can afford, but once you are ready to make an offer on a property – a pre-approval can help differentiate you as a serious buyer.
So, what happens after deciding how to leverage your tax refund? Well, after you’ve received your pre-approval, we can decide what properties fit best with your desires and what we have to work with. This is when we go house hunting.
Then, as soon as you find a home that peaks your interest, my expert negotiating skills will come in to play, as we make an offer and get you into a contract. Once a seller accepts your offer, we’re at the home stretch.
We will have a home inspection done to identify and address any hidden issues in the home with the seller, as well as do an appraisal to ensure the property is worth how much you are prepared to pay for. Finally, your lender will receive this info, a final loan approval will be issued, and a closing date will be scheduled to sign your final paperwork.
That’s it! Saving for a down payment can seem daunting, but this tax season, your refund could be your key to homeownership.
As always, if you need any help listing or buying a home, please don’t hesitate to reach out.
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