5 Ways You Can Use Your Tax Refund to Purchase a New Home

According to the IRS latest statistics, 83% of Americans U.S. Tax returns result in them getting a refund and the average refund amount it $3,120. I know every year we start with the meme and W2 post. It annoys most and starts debates about “people can do whatever they want with their tax money”! It may seem like free money but the reality of it all is you decided to give the government an interest free loan on your money all year, just to get a “refund”.

I have heard people say, “I’m Getting a NO Money Down Loan so I can Spend My Tax Refund”… Hold your horses baby, because that is not the case. Hold on for a second and let me school you on the reality of buying a New Home.

Even 100% down loan programs like VA Loans and USDA require you to have some money in the bank. You should not simply spurge. You have to have a strategy for a tax refund so you can come out a winner. First off we’re not buying a 2010 Honda again this year with 200,000 miles on it.

There are 5 Legitimate ways your Tax Refund can get you off the sidelines watching other people buy their homes and get you on the court with the ball in your hand! It’s time to Boss Up this season. You want to make sure you speak to a member of the Flagler Real Estate Team to get you a customized plan in place for home ownership in 2020.

1. The first way you can use your tax refund is to Pay the Down Payment on a home. It’s no wonder February is the month that more contracts are written than any other month in the year! People are using those tax dollars to maximize their buying power.
2. I’ve got an Awesome Real Estate Broker named Tiffanie Flagler and she helped me get the perfect down payment assistance program for my new home. It is another awesome idea to put your tax refund in the bank and use it as Closing Cost on your new home. Work with an expert, Tiffanie, and she may be able to show you how you can also get your closing cost covered so that you can save that money to furnish your new home.
3. Maybe you have been through a Credit Consultation with a Flagler Real Estate team member or referral partner and you have been advised to Pay Down Some Debt to get your Debt to Income Ratio lower so that you qualify for a Mortgage, well LISTEN and apply your tax refund.
4. Next you should have some money to show the bank that you definitely understand how money works and that you have a savings in place to fall back on in the case of emergency, put your tax refund in your bank account as Reserve Funds. This will make your closing go a lot smoother as a buyer.
5. I am going to spend some time here because this is most of my client’s biggest problem. Either one they have no credit cards and are losing out on 30% of their credit score, or they have maxed out their card and scores have plummeted. Here are a few reasons why it’s a good idea to use your tax refund to pay off credit card debt:

Carrying a high balance on your credit cards and paying just the minimum monthly amount, over time the interest payments will cause you to pay thousands of dollars more than you borrowed in the first place. This also directly affects your debt to income ratio and keeps your scores from increasing. The best thing to do is to keep your credit card balances below 10% so that you maximize your credit score by having a low utilization score.

Your credit utilization rate is the percentage of your available credit that you simply are literally using. For example, if you have a $1,000 credit limit on your credit card, and you have $500 of credit card debt, your credit utilization rate is 50%.

The lower your utilization rate the better your credit score — it shows that you can manage money and are not using credit cards to sustain your lifestyle. Mortgages look at this especially because it gives them an idea of whether or not you will be able to make payments successfully.

By making payments on-time every month, and keeping your credit utilization rate low, you will have a better credit score. This will help you save money in the long run because better credit scores get lower interest rates, car insurance, mortgage rates and etc.

If you utilize your tax refund to get yourself out of debt this year and begin to maintain control over your finances you will be on the path to home ownership. If you can’t afford to pay off all of your credit card debt, using your tax refund as a one-time source of funds may assist you to pay down your debt and reduce your overall credit utilization. It’s not every day that most people suddenly receive a few “extra” thousand dollars in their bank account so use your refund to enhance your financial future.

Now that you have been educated, you cannot take that back so apply this to your life and watch God Bless You with your New Home so you can “Kiss Your Landlord Goodbye” with the Flagler Real Estate team in 2020!