If youâ€™re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.
Using data from the Internal Revenue Service (IRS), itâ€™s estimated that Americans canÂ expectÂ an average refund ofÂ $2,925 when filing their taxes this year. The map belowÂ showsÂ the average anticipated tax refund by state:Thanks to programs from theÂ Federal Housing Authority, Freddie Mac,Â andÂ Fannie Mae,Â many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs LoansÂ allow manyÂ veteransÂ to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, aÂ 20% down payment isnâ€™t actually required. Itâ€™s important to work with your real estate professional and your lender to understand all of your options.
If youâ€™re a first-time buyer, your tax refund may cover more of a down payment than you realize.
If you take into account theÂ median home sale priceÂ by state, the map below shows the percentage of a 3% down payment thatâ€™s covered by the average anticipated tax refund:The darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs.Â Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.
A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, â€œOne third report that they primarily saved the stimulus money.â€ If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.
Saving for a down payment can seem like a daunting task, but it doesnâ€™t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals.