One of the main obstacles to purchasing a house is the large sum of money that can be needed upfront, whether it’s a down payment, making repairs to your current home you are selling, or mortgage closing costs. If you are expecting a sizable tax return this year, you can use this money in various ways to help with the home buying process.* Here are a few of them:
- Earnest money deposit. It’s a seller’s market, so you want to present a compelling offer by making a substantial earnest money deposit. Earnest money is the funds you put down before closing to show the seller you are serious about buying. Putting down more than other home seekers may put you at the front of the line.
- Renovating or remodeling your current home. Maybe you’d like to use your refund for home improvements to create better curb appeal to potentially get more for your house when you sell.
- Make a down payment. Conventional loans can require as little as a 3% down payment, but putting down at least 20% can help you avoid paying private mortgage insurance (PMI).
- Home inspection. You want to make sure your investment is sound, and a thorough home inspection from a reliable company is both required and vital.
- Closing costs. Closing costs are all the associated fees when you close on a loan. While some lenders will allow you to finance your closing costs by incorporating them into the mortgage loan, you will pay more interest over the life of the loan, so the more closing costs you can pay upfront, the better.
- Paying down debt. When applying for a home loan, one of the most critical factors is your credit score. Using your refund to pay off high-interest credit card debt could raise your credit score and potentially lower the interest rate on the mortgage loan.
- Pay discount points. During the loan process, you have the option to pay discount points, which is essentially “buying” a lower rate. One “point” is equal to one percent of the loan, so for example, if your loan is $300,000, paying one discount point means paying $3,000 more at closing, which may save you in interest payments over the life of the loan.
Buying a home is one of the most important financial decisions you will make and using your refund to assist with the purchase could give you a great start.* If you have questions about securing a home loan, talk to the experts at NASB at 866-465-0753 or click here for more information.
*This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. North American Savings Bank does not make any guarantee or other promise as to the results obtained. You should consult your tax, legal, and accounting advisors before engaging in any transaction.