Homeownership has been and remains a cornerstone of the American Dream, and a strong desire remains among Americans to own their own home. In fact, research shows more than 7 in 10 renters aspire to own their home one day. It is widely agreed among experts that secure and stable housing has social, academic, familial and financial benefits for individuals and families. What many of those renting might not realize though, is that they can leverage their tax return to take advantage of still affordable home prices and historically low interest rates. Who knew you could use your tax refund and turn it into a lifelong investment?
Of the approximate 140 million tax returns filed in the United States, some 80% of those filing qualify for, or are expecting, a tax refund. For many Americans, a tax refund is a significant financial boost and an opportunity to put this money to work in big ways. In 2012, the average tax refund was $2,985. When it comes to tax refunds, many Americans say they plan to do something responsible with the money they get back, such as pay down debt or put it in a savings account. While we agree with, and even advocate, doing both, we also know many will find themselves spending it on things that have no long-term value and may be unaware of how easy it is to use their refund to invest in their future.
Those home buyers who qualify for an FHA (Federal Housing Administration) loan are only required to put 3.5% down. With such a low down payment, even if your tax refund doesn't cover the entire cost of it, it will still cover a considerable amount. Or combine your tax refund with the money you’ve already been setting aside for a down payment to maximize your money to its fullest potential. Did you know that if you pay 20% down on your home you are not required to pay PMI (Private Mortgage Insurance) which is usually around 1-2% of the outstanding principal amount of your loan. On a home loan of $150,000 that averages out to around $125-150 a month.
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