It’s tax season again, and before you make your list of cool new toys to buy with your refund, ask yourself this question: What if you could use that refund to buy a house?
The average tax refund in the U.S. is between $2,000 and $3,000 dollars depending on the state. While that’s obviously not enough money to buy a house, it’ll get you a lot closer than you might think!
A normal down payment on a house is about 20% of the total purchase price of your home, but you don’t necessarily have to pay the “normal” down payment. If you qualify as a low or middle income earner, you might qualify for an FHA loan, which only requires a 3% down payment for a First Time Home buyer in Florida. Some quick math will show that suddenly your tax return isn’t looking quite so insignificant anymore!
A lot of younger Americans don’t see home ownership as a real option, and some even consider it an unnecessary financial burden, but that’s just not how it works. The question in the long term isn’t about whether you can afford a home, it’s about whether you can afford not to. If you stay anywhere for more than a handful of years in the U.S., then home ownership is going to be the more cost-effective option.
Paying rent is expensive, and it’s basically equivalent to lighting money on fire. You’ll never see it again. Paying a mortgage, on the other hand, puts that money into your house. That money, except for the part that pays the interest payment on your loan, isn’t gone. You can get it back when you sell the house.
On the other hand, owning a house means paying for repairs, upgrades, and maintenance. A lot of those costs come up front, but they pay for themselves because of the money you save on not paying rent. Even better, money spent improving your home will actually raise the value of it, so that you can get at least some of that cash back if you decide to sell it.
Many families don’t have enough money to pay the heating bill every month, much less the remaining chunk of event that much smaller 3% down payment. If you need $150,000 worth of house, then your 2,000 tax return won’t even get you halfway there. That’s why there are other down payment assistance programs that you can take advantage of to cover that last barrier. Many of these programs cover 3% of your home’s total price, and can occasionally also cover closing costs, so you don’t necessarily have to spend a penny before move-in day.
Maybe you’ll be able to use that tax return on some new furniture in your new house instead!