The countdown has begun – there is just over two months until Tax Day 2020!
Last year, the IRS processed approximately 155 million individual tax returns and issued more than $320 billion in refunds. If you're expecting a refund this year, here are three ways it could bring you closer to homeownership.
Save for a down payment. Saving for a down payment can be one of the biggest barriers to homeownership. But many of today's homebuyers overestimate the size of the down payment they need. Today, the average down payment is between 5 to 10% — not 20%, as a lot of people assume. With options like Freddie Mac's 3% down Home Possible® mortgage, qualified borrowers are able to make a down payment of as little as $6,000 for a $200,000 home.
Down payment assistance programs can also help you bridge the cash gap. With over 2,500 programs across the country that can help you save on your down payment and closing costs, a great place to start is researching where you live. Many state, county, and city governments provide financial assistance for people in their communities who are well-qualified and ready for homeownership. Check out the programs available in your market and see if your eligible. Also consider meeting with a housing counselor to discuss your options.
Pay for closing costs. Typically, homebuyers will pay between about 2% to 5% of the purchase price of their home in closing costs, or between $4,000 and $10,000 on a $200,000 home. Closing costs will vary depending on where you live so be sure to see where your state stacks up and understand your costs.
Lower your interest rate. You can pay discount points to buy down your mortgage interest rate. A "point" equals one percent of the loan. It's essentially an upfront payment to lock in a lower interest rate on your fixed-rate mortgage. So, if you are borrowing $200,000, paying one discount point would mean paying $2,000 upfront at closing – but it may end up saving you more in interest payments over the life of the loan. See if paying points might make sense for you.
For more information on becoming a homeowner visit My Home by Freddie Mac®.