< Back to News & Insights

How to Use Your Tax Refund to Buy a House

March 1, 2019 — 3 min read

Are you expecting a tax refund this year? Before you decide to spend it on a new pool table or jet ski, consider the fact that you could put those funds toward buying a home instead! Here are three ways that your tax refund could be used to bring you closer to your goal of homeownership: SAVE FOR A DOWN PAYMENT There's a common misconception that to buy a house, you need at least a 20% down payment. This is not the case! Depending on your credit history and other factors, many applicants can make a down payment as low as 3%. There are even some options for no down payment loans. If your tax refund is not quite enough for a down payment, you can also look into down payment assistance programs to help bridge the gap. There are thousands of programs across the country, but a great place to start is close to home. Many state, county, and city governments provide financial assistance for people within their communities who are qualified and ready for homeownership. Check out this resource for down payment assistance options, or try the links below for some additional area-specific options: Oregon: Oregon Housing and Community Services, HUD Washington: HUD Idaho: HUD Arizona: HUD Colorado: HUD New Mexico: HUD California: HUD
  • PAY FOR CLOSING COSTS
If you've already got your down payment sorted out, you can use your tax refund toward the closing costs on your loan. The amount of closing costs varies from loan to loan because many fees are based on a percentage of the amount of money borrowed. The more you borrow, in general, the higher your costs. Typically a homebuyer can expect to pay between 2% and 5% of the purchase price in closing fees. The amount can also vary depending on where you live. You can use this website to see approximately where your state falls in the range of closing costs.
  • LOWER YOUR INTEREST RATE
Already handled your down payment and closing costs, and still have some surplus tax refund burning a hole in your pocket? Great! You can use those funds to pay discount points and buy down your interest rate. A "point" is equal to one percent of the loan amount. In essence, it's an upfront payment to lock in a lower interest rate on your fixed-rate mortgage. For example, if you are borrowing $300,000, paying one discount point would mean paying $3,000 upfront at closing, but it could end up saving you more in interest payments over the life of the loan. Freddie Mac has provided this website where you can estimate how paying extra points might lower your rate and be more beneficial to you based on how long you expect to live in the home.

If you have questions about using your tax refund toward your homeownership goals, or about anything related to the home-buying process, fill out the form below, or contact us!

{ include "_components/button" with { primary: false, value: "Let's go get it", link: '/mortgage-loans', icon: true } %}