Are you facing a bump on the road to buying your own home? You really want to buy a house or a condo. Your rent is going up faster than your paycheck and you want to invest in your future instead of your land lord’s. But coming up with a down payment is a big obstacle. Do you feel like you’ve hit a road block?
You’re not alone. The number one problem cited by first-time homebuyers is the difficulty they have saving for a down payment on a new home. With tax season upon us, now is the perfect time to augment your down payment with your tax return.
Having just a 3% down payment is enough to qualify you for a mortgage. Really. That means you would need $3,000 down for a $100,000 home. According to the real estate website, Trulia, the average home sale price in the Dayton area between September 15th and December 15th, was $119,905. You could buy that average priced Dayton home with just $3,600 down. Of course, the more you can put down, the better off you will be in the long run. Higher down payments can lead to better interest rates and potentially avoiding Private Mortgage Insurance (PMI). Both of these would save you many thousands of dollars over the length of the loan.
Now, let’s get back to your tax return. According to the IRS, the average tax return in the spring of 2015 was $2,800. That would make up a serious chunk of your down payment. Of course, not everyone is getting a tax return of that magnitude. However, if you are planning to buy in the next few years, you have time on your side. Only getting a few hundred dollars back from the government this year? Put that money into a separate savings account. Add more to the account every month along with future windfalls, and your down payment will grow quickly.
Before you spend your tax return on something else, ask yourself what are your priorities? Would you rather grow your down payment or buy a new flat screen TV? If your priority is to buy a new home, then take the road towards homeownership; use your tax refund to grow your down payment fund.
Having Enough for a Down Payment May Not Be Your Only Obstacle.
If you’ve been struggling to put together a down payment, you might need to take a closer look at your finances to determine if you really are ready to buy a home. Your new house payment could very well be much lower than your monthly rent. However, a new home also comes with other expenses like homeowner’s insurance, taxes, and home maintenance. It’s wise to go into your new home with an emergency savings that you can use to make unexpected repairs. For instance, when your furnace breaks down, you have to pay for the repairs on your own.
If you want to know if you are ready to buy a home of your own or want someone to review your finances, contact the HomeOwnership Center and we’ll give you our expert advice.