Expecting A Tax Refund This Year?
Saving for a down payment is one of the biggest barriers to home ownership in part because many believe you have to put down 20%. Did you know that you can put as little as 5% down? Consider setting that refund aside and let’s talk about how big a dent it’ll make in your down payment.
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 today’s homebuyers persistently overestimate the size of the down payment they need. Depending on your credit history and other factors, many borrowers can make a down payment of about 5 to 10% — not 20%, as a lot of people falsely assume. With Freddie Mac’s 3% down mortgage – Home Possible Advantage®–qualified borrowers could make 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. There are thousands of programs across the country that can help you save on your down payment and closing costs. A great place to start is right where you live. Many states, 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 you are eligible.
- Pay for closing costs. A homebuyer typically pays between about 2% and 5% of the home purchase price in closing fees, but the amount varies widely depending on where you live. 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 interest 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 how paying extra points might lower your rate.