If youre planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.
Using data from the Internal Revenue Service (IRS), its estimated that Americans canexpectan average refund of$2,925 when filing their taxes this year. The map belowshowsthe average anticipated tax refund by state:
Thanks to programs from theFederal Housing Authority, Freddie Mac,andFannie Mae,many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loansallow manyveteransto put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a20% down payment isnt actually required. Its important to work with your real estate professional and your lender to understand all of your options.
How can your tax refund help?
If youre a first-time buyer, your tax refund may cover more of a down payment than you realize.
If you take into account themedian home sale priceby state, the map below shows the percentage of a 3% down payment thats covered by the average anticipated tax refund:
The darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs.Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.
Not enough money from your tax return?
A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, One third report that they primarily saved the stimulus money. If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.
Bottom Line
Saving for a down payment can seem like a daunting task, but it doesnt have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals.
