Tax season is in full swing. This means that many local Omahans will be receiving or have already received a tax refund of varying amounts. And we think the best way to utilize that tax refund is to save for a down payment.
We looked it up and a lot of Americans are on the same page about how they’ll utilize the money. According to NORC at the University of Chicago, “Nearly half of U.S. taxpayers (46 percent) plan to add their tax refund check to their savings […] Roughly a third (35 percent) plan to use the check to cover everyday expenses or pay down debt (32 percent).” See the full breakdown of their survey results by income level below.
With nearly half of Americans already planning to save their return, keep reading to find out why we think using your tax return to save for a down payment is your best bet.
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Why Save for a Down Payment?
We’ve found that in our experience, the down payment is one of the biggest obstacles standing between renters and homeownership. Part of this is due to the fact that 62% of Americans believe they need a 20% down payment.
The myth that you need a 20% down payment is just that, a myth. In fact, there are a multitude of ways to buy a home with less than 20% down. One of the ways we recommend for some clients is a conventional loan. Did you know you can qualify for a conventional loan with as little as 3% down?
Now, let’s think this through. Say you receive a tax refund of $2,818 – the average tax refund in Nebraska for the 2020 filing season. Many first-time homebuyers look for homes in the $200,000-300,000 range. Let’s say you find a home for $250,000. A 3% down payment would be $7,500. That means by saving one year’s tax return, you’ve already saved over one-third of the money needed for a down payment!
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Ready to start the mortgage process? Our online application takes anywhere from 5-20 minutes to complete and we can have you pre-approved for a loan in just a few hours.