When you’re preparing to buy a home, every dollar counts, whether it’s for the down payment, paying down debts, or building up your emergency fund. One resource many people overlook is their tax refund. If you find yourself with a return, here are a few ways to lessen the financial burden of buying a new home.

1. Reduce Your Debt-to-Income Ratio

Debt-to-Income-Ratio (DTI), or how much money you make per year compared to how much debt you have, plays a huge role in securing a home loan. Not only does a lower DTI improve your financial picture to lenders, it can also result in better interest rates and repayment terms.

2. Build Cash Reserves

As you take on the responsibility of a new mortgage, you will certainly appreciate the peace of mind that an emergency fund can provide. Cash reserves also shows lenders you’re prepared for unexpected circumstances.

3. Closing Costs

With so much focus on downpayment and monthly mortgage payments, first time buyers can easily overlook closing costs. Closing involves a host of fees that may include attorney costs, home inspection, title insurance, and escrow costs. Using your tax refund will help ease the financial burden that comes with this.

4. Larger Down Payment

The more money you can contribute to the down payment, the smaller the loan amount will be. Not only can this help you decrease your monthly payment, it could also increase your buying power.

5. Home Insurance

Home insurance is one of those mandatory costs that works to protect your family against potential catastrophic damages. While this cost can be included in your mortgage via escrow, paying the insurance term in full often comes with a discount—which is a perfect use for your tax refund.

6. Allocate Funds for Deposits

Good Faith Deposits are payments that are made early on during the home buying process, acting to prove your commitment and securing your interest in a property. These funds will go towards your down payment and closing costs while giving you leverage in competitive markets.

Keep Reading: 7 Tax Deductions for Michigan Homeowners to Take Advantage of

About Michigan Mortgage Lender, Julie Krumholz from Superior National Bank

If you’re not quite sure about the best use of your tax refund when it comes to home buying, Julie Krumholz can help.

For over 35 years, Julie Krumholz has helped homebuyers with different financial backgrounds to make the dream of homeownership a reality. Julie has worked in processing, closing and loan origination, underwriting, QC auditing and has even co-owned a mortgage brokerage firm. Her passion for helping homebuyers has made her a trusted resource for those navigating the homebuying process and beyond.

Call Julie at 586-382-5482 for all of your home loan needs!