If you are like many Americans, you’ve received your tax refund for the year. If you are also like many Americans, you are considering purchasing a new home in the near future. This could be a good year to buy your first or new home. According to Forbes, housing prices are expected to grow at a slower pace than in recent years and mortgage rates could stay around 4% this year. So what can you do with your tax return to help save for that new dream home? Regardless of whether you are considering purchasing this year or a year or two down the road, here are a few tips to help get you moving in the right direction.
Open a “Dream Home” Savings Account
Many people talk about saving for their dream home but don’t take the steps necessary to do so. By opening a bank account that is dedicated to saving for your down payment, you are taking the first steps to actively make your goal a reality. Once you have used your tax refund to open the account, create automatic withdrawals from your checking account maybe on a weekly, bi-weekly or monthly basis. By doing so, you are ensuring that you’re investing in your future self and your dream.
Consider Opening a CD
While the stock market seems like a great place to put your money, there is no guarantee on your return. A CD, certificate of deposit, offers that guarantee. You can receive a 1-3% return on your investment. CDs require a minimum deposit and length of time so if you are considering purchasing your home this year, you should look to save your money elsewhere. CDs provide an option for longer-term savings since many of them have a higher rate of return than traditional savings accounts.
Consider First-Time Buyer Incentives
If you are purchasing a home for the first time, you may qualify for a first-time homeowner buyer incentive. By tapping into one of these programs, you may qualify for a lower down payment and your tax refund may be just what you need to make that first-time home purchase happen for you. For example, an FHA loan, a loan that is administered via the Federal Housing Administration, offers first-time buyers the option to put down as little as 3.5% of the purchase price. Another perk to this program are lower closing costs.
Refinance or Pay Off Your Current Debts
Sometimes the difference between getting a good interest rate on a mortgage and a great interest rate on the mortgage is your credit score. To help boost your credit rating, consider refinancing or paying down some of your current debt. With interest rates holding steady, you could be eligible to receive a lower monthly payment on your current loans. Using your tax refund to pay off some of your current debt shows lenders that you are timely in your payments and fiscally responsible.
Invest in Your Current Home
If you are a current homeowner, consider making updates to your home to get the maximum return on your investment. While many homeowners think that big-ticket items like redoing kitchens and bathrooms are the best place to spend our money, U.S. News suggests that smaller, more noticeable changes may create the impression that buyers are looking for. Think about replacing your appliances with high-efficiency appliances, replacing your windows or adding insulation to your home. These small changes that can be accomplished using your tax refund and can make a world of difference in receiving maximum value from your home in the future while saving money on your current energy costs today.
No matter what stage of home buying you are in, whether you are a first-time buyer or looking to purchase again, saving for your dream home is a big step. Choose the path that is right for you. If you need help determining how best to proceed, click here to get in touch with one of our loan officers.