Investing in Homeownership

Categories: Resources & Tips
Tax Refund as Downpayment

As the snows of Winter transition slowly into the rains of Spring, the thoughts of many households turn to that yearly festival of finance and frustration: taxes. While the paperwork may worry, and the numbers may sometimes confuse, the happy reality is that more and more people are actually receiving tax refunds each year, instead of paying additional taxes to Uncle Sam. Receiving that refund now puts many into the “early filer” category, as the rush to receive the refund check drives many to get their taxes in as early as possible, far advanced of the April deadline. The biggest worry on their minds this year? What to do with their refund money!

According to the IRS, taxpayers received an average tax refund of $3,000 last year, up almost 5% from 2009. That sum just happens to be an ideal inroad toward a downpayment on a new home, a happy circumstance for those who are looking to become homeowners. The convergence of low interest rates and high-value builder incentives has created a buyer’s dream in today’s real estate market, and downpayments of as little as a few thousand dollars can be enough to get buyers into an affordable new home. Whether funded through an FHA (Federal Housing Administration) loan that requires only 3.5% down, or via a homebuilder’s downpayment program that matches (or covers the entirety of) the buyer’s downpayment amount, there is a proliferation of options for those looking to buy a home right now, at terms that may come only once in a lifetime.

Still not convinced? Consider this: last year, a survey by Bankrate.com found that over 84% of those who received refunds decided to save or invest the money, with only 7% deciding to use the funds for a shopping spree or vacation. Wisdom on the street seems to suggest that consumers are working harder to make more of their money, and are taking the time to make solid choices for their financial futures. As everyone knows, real estate is an important part of the overall financial plan in any household, and by translating a tax refund into an investment in a primary residence, homebuyers can begin to reap the rewards of homeownership. These benefits include the building of equity in a home, and the increased tax-refunds they will see in subsequent years, thanks to the federal mortgage interest deduction!

This year, when you receive a tax refund, ask yourself: how can this money help me to achieve my goals? You just might find that turning that refund into an investment in your family’s new home may be the best answer of all.

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