In 2018, the IRS issued over 100 million refunds averaging that amount. That’s about 70% of you. So what do most Americans do with it? According to a report by GOBankingRates, 27% will use it to pay down or pay off debt. And out of this group, Millenials are the most likely to use their refund in this way. What’s interesting, is that Millennials will make up 45% of mortgages in 2019, according to Danielle Hale, chief economist for Realtor.com.
The American dream of home ownership is still alive in 2019, and whatever segment of home buyer you fall into, give a nod to these savvy savers. Follow their lead by using your tax refund to prepare for the process of buying a home, which according to Zillow, starts with checking your credit score and overall debt.
If your credit score is good and your debt-to-income ratio is approved, there are other ways to use your tax refund to guarantee you close on the house of your dreams and maintain financial health and happiness as a homeowner.
1. Closing Costs
Knowing what closing costs to expect before the keys are handed over depends on a variety of factors and is not a one-size-fits-all formula. The type of property you buy, where you buy it and who you buy it from all matter. Other fees to factor in may include your application fee, your appraisal, your home inspection and insurance.
2. Property Taxes
Don’t assume property taxes come standardized either. NerdWallet advises homebuyers to be aware local governments can raise property taxes to cover municipal projects or expenses, causing property taxes to rise. The assessed value of a home due to upgrades or market conditions can also create unsteady, and often unexpected, fluctuations in the taxes you’ll owe.
First-time homebuyers often underestimate how big of a hit their utilities take. Moving from an apartment or single-family home to a larger one can increase monthly bills by hundreds, and income previously allocated to savings and spending may be drastically affected in a negative way. Talk with your agent about estimates on what to expect.
If you already own a home, are purchasing a fixer-upper or dream of living in a custom-built space, use your tax refund to save or spend on home renovations. Not only are you investing in future resale value, you’re improving the quality of everyday life.
Open doors in 2019 by using your tax refund to stand out to sellers, stay on top of your expenses and secure the home of your dreams, long after closing day.