Purchasing a home is an exciting process for many families. While it’s exciting, it can be overwhelming to know where to start or what resources are available. One resource that people might overlook is their tax refund. As tax season rolls around, it’s a good idea for potential home buyers to understand how their tax refund can help them achieve the American dream.
Use Your Refund to Help Cover Closing Costs
At closing, there are typically fees that can’t be rolled into your mortgage payments. These fees, or closing costs, can include attorney fees, home inspection fees, title insurance, and escrow costs. Your lender can give you an idea of how much money to set aside for closing costs but having that extra income from your tax refund can help.
Use Your Refund as a Deposit
A deposit is good faith money that is put towards your home and goes towards the down payment and closing costs. This deposit can give you an edge in a competitive housing market because it gives the seller security. Since that money goes towards your down payment it can help lower the loan-to-value amount of your mortgage and ultimately help lower your monthly mortgage costs.
Put Your Refund Towards Home Insurance
When you purchase a home, lenders require that your home be insured in case of catastrophic damages. Insurance is important to protect your investment and ensure that if damage does occur, you’ll have the money to repair it.
The cost to insure your home can either be escrowed or you can pay for the insurance term in full. Many insurance agents will offer a discount when the term is paid in full, which can save you money in the long run. Using your tax refund to pay your insurance upfront is a great option when purchasing a home.
Other Ways to Use Your Tax Refund Toward a New Home
- Pay off debts to improve your debt-to-income ratio and credit score.
- Keep your tax refund in your bank account as cash reserves.
- Use your tax refund to hire a moving company or make improvements to your new home.
If you’re unsure of where your tax refund would be best used in your personalized mortgage experience, consult with your lender. They will have the best insight and advice to help make your dream of homeownership a reality.
About Michigan Lender, Julie Krumholz
Julie Krumholz has been helping Michigan homebuyers for over 30 years and has several loan programs available for various incomes and financial situations. She brings a wealth of experience to her clients and nothing makes her happier than seeing the face of a happy and excited customer at the closing table.
If you are looking for a mortgage lender in Michigan, call Julie from Superior National Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have.
