It's that time of the year, time to do our tax returns. Some of people dread this time of year and others look forward to getting a tax refund from the IRS. If you are thinking about buying a home in 2020, this might be the best time to get your finances in order. Depending on how much money you receive on your tax return, you could use the money towards a down payment on a house.
There are so many things you could spend your refund on, so why on a downpayment on a home?
According to the IRS the average tax return for 2018 was $2,833. No matter how much you receive, you can always put that money on a down payment on a house. How much money you need for a down payment is dependent upon the amount of money you want to barrow and how much you are required to put down. Most mortgage companies require you put down 20%, however there are options with much lower down payment requirements. For example, FHA only requires 3.5% if your credit score is 580 or more.
So if your buying a single family home for $100,000, you will need $20,000 for a down payment. With a credit score of 580 or more, you would need $3,500 for an FHA downpayment. With a $2,833 tax refund, you would need to come up an additional $667 for a down payment.
Housing prices will continue to rise. Home prices have risen almost 5% which means that the longer you wait the higher the price you will have to pay to purchase a home.
The number of homes for sale is low. With low inventory, that means there is more competition for home which drives prices higher.
Buying a home gives you tax duductions when compared to renting. You can deduct your mortgage interest and your property taxes on you income tax.
To learn more about using your tax refund to a buy a house, contact me. We can sit down and determine how to best fit your refund into your overall financing plan.