Smart ways to turn your tax refund into Homeownership
Home buying (and selling) season usually kicks off around Tax Day in early Spring! For most the scramble to save as much as you can prior to buying a home can seem daunting, Closing costs, down payment, inspections and earnest money oh my…. Here are some of the top ways you can spring forward into homeownership this spring and use your hard earned dollars to help.
- Pay down debt – To purchase a home you need a credit score of 580 or higher and this is a crucial factor to determine your eligibility in obtaining a loan. Increase your credit score and lower your debt to income by paying off high interest credit card debt. For other tips on what should be paid down its a great idea to speak with a lender.
- Down Payment– Depending on what loan you and your lender choose you will need 3.5 percent -5% down this is a total amount based off the purchase price of the home you choose. That IRS windfall you were not counting on can really add to what you have saved quickly.
- Earnest Money Deposit- When you find the perfect home you will be required to give a deposit which is called Earnest Money. This amount will later come off the total down payment and closing cost amount needed to secure your loan. This Earnest Money is given within a few days after a contract is signed and usually equal to 1% of the home price. on a $200,000 home most sellers like to see $2,000. as Earnest money.
- Home Inspections- While it is not a requirement to get a home inspected before you purchase it, we always recommend you do so. Its a good idea to make sure your not getting in over your head or that something will cost more than you budget for repair. Home inspections are completed within the first 5 business days a home is under contract and typically range in price based off the home square footage.
- Savings- Start that rainy day fund. A great rule of thumb is to have 6 months worth of mortgage payments in an account in case you should ever need it to fall back on. Sometimes when owning a home you have unexpected maintenance costs having money aside can release you from the financial burden.
- Build Equity- Not every home is move in ready and currently lots of deals on homes that need a little bit of work, build some sweat equity with your savings and make some simple renovations that can help you increase the value of your home exponentially.
Thinking of taking the plunge into homeownership? Reach out to us and we will get you on the right path! In the mean time have fun searching what is currently For Sale! www.michelemorrisrealty.com/homes-for-sale-featured/