If you’re thinking about buying a home, consider using your tax return for your down payment. According to the 2020 NAR Home Buyer and Seller Generational Trends, 30% of buyers that are 29 years and younger cited that saving for a down payment was the most difficult step in the home buying process. Utilizing your tax refunds are an easy way to quickly increase your down payment funds without having to make other financial sacrifices.
When you file your taxes early (before the Thursday, April 15th deadline), you are giving yourself an advantage to receive your refund in a timely manner. Most employers will have W-2’s and 1099’s available by the end of January which will give you a head start to the process.
Last year’s filing date was delayed 3-months due to the coronavirus pandemic. There is no declaration that the same deferral will occur again this year. Even if there is a delay, it is better to get your taxes filed sooner rather than later so there isn’t a chance of receiving your refund later than expected.
According to the IRS, 90% of tax refunds are sent out within 21 days of taxpayers filing. Those who receive their payments within that time period are filing electronically and have direct deposit set up to receive their payment. You can check the status of your tax return after 24 hours of filing electronically, as opposed to 6 weeks if you mail in your paper return. Below is a link for the page that will help you determine when you should expect your return after filing.
If you are qualified to have a USDA or VA loan, that means your down payment will be 0%. If you are eligible for a zero-down loan, you can always use your tax refund towards your closing costs. Budgeting for closing costs is critical because they can range anywhere from 2-5% of your home’s purchase price, similar to some down payment costs.
Another way to utilize your tax refund for your home is to put it towards home improvement. If you are purchasing a fixer-upper, your tax refund could be the safety net needed if projects cost more than anticipated. Consider quick updates to refresh your home including new paint, updating appliances, or updating your home’s curb appeal.
These are just a few ways that you can utilize your tax refund towards your home, if you have any questions about documentation, of using your tax refund, contact our team! 410-878-9730