We’re in the middle of tax season! Many people get to enjoy a return and if you’re one of them, it’s time to stop scrolling through Amazon. Before you start shopping for big purchases like televisions or that hot tub you’ve been eyeing for the backyard … a more practical approach could be using your tax money for your new home. Let’s look at some ways you can use that cash.
Down Payment
There are a lot of factors in how much money you’ll need to buy a house, but the down payment can be one of the most crucial factors.
Depending upon the type of loan, you can expect to pay between 3% – 6% of the purchase price. When house-hunting in the near future, houses are flying off the market within hours after listing. Going into searching for a home with the range you want, having a down payment ready will help secure and speed the process up.
By putting a bigger down payment down, you’ll borrow less when it comes to your loan and you’ll strengthen your offer. Sellers will be more likely to accept your offer if a heavier down payment is attached. Remember: right now it is likely there will be multiple offers on a house and you want yours to stand out!
Closing Costs
If your offer ends up getting to the closing table, you’ll have more of a cushion with closing costs. These are additional costs that you’ve accumulated on the way. We’ve seen some homebuyers be unaware of how steep some of these prices can be depending upon their loan, area, and choice of service providers. Using your tax return for this means more money in your pocket after closing. Here are some things to look out for:
- Down Payment – The part of the purchase price that you pay out-of-pocket.
- Loan Origination Fee – This is charged by your lender as compensation for processing a loan application. It usually ranges from 0.5 to 1 percent of the loan amount.
- Home Inspection – Making sure the house you are potentially purchasing is free of major issues is critical. Inspection costs are in the $200 – $500 range. Don’t be afraid to shop around and ask your agent for referrals!
- Appraisal – Your lender needs to make sure the home they are lending you money for is worth it. They send an appraiser to do this and you foot the bill, usually around $300 to $500.
- Credit Report – The cost to have your lender pull a full credit report, usually around $30.
- Private Mortgage Insurance Premium – This is insurance that protects your lender, not you, and it ranges from 0.55% to 2.25% of the original loan amount per year for a conventional loan.
Repairs and Renovations
Before the house is yours, you may end up having to pay for repairs before the property can be yours. A new roof, a new air conditioning unit, a new water heater… there are many things to consider and save up for. Your tax money could be held in so many ways if your journey from contract to closing is bumpy. Utilize that to your advantage!
However, if the keys are in your hand? The fun can begin! Making your house your home is no easy task, but having the money to make your vision a reality can definitely help. Some popular home renovations after home purchase are installing new floors, changing light fixtures and painting.
Conclusion
Now that you know you have a little nest egg, make sure it’s going towards something that can improve your state of mind and bring harmony to your life. A new home is exciting, but stressful! Our trained staff is here to help you put your money to good use.