Are you expecting a tax return this year? Tax returns can be more than just a windfall—they can be a great way to kick start your dreams of becoming a homeowner in North Carolina. Read on to learn some creative ways you can leverage your 2020 tax return so you can make home ownership more affordable.
Pay Down Your Debt
While it may be tempting to spend your tax return funds when they arrive, one of the best things you can do is pay down any of your existing debt. After all, debt just means you are paying money to use money, and having that hanging over your head can impact your credit score, your debt to income ratio and many more things that impact your ability to buy a home. If you have any existing debt, it’s a good idea to us your tax return funds to pay it down.
Build Your Emergency Fund
When you rent a home, many of the maintenance tasks and updates fall to your landlord, but when you own a home yourself, there is no landlord to go to if something goes wrong. That’s why it’s so important to have a well-funded emergency fund before you buy a home. If your debt is paid down already, building up your emergency fund is a great way to put your tax return to use. With a comfortable emergency fund on your side, you will be ready for any of the curveballs that home ownership can throw at you.
Prepare for Closing Costs
In a hot real estate market, it is less likely that sellers will be willing to fork over any funds for closing costs. That’s why it’s so important to plan to pay closing costs when you buy your home, so you aren’t surprised at the closing table. Using all or a portion of your tax return to pay for closing costs on your home may help make sure your home purchase doesn’t get derailed.
Boost Your Down Payment
It’s true that you don’t have to put down 20% on a home these days to buy a house, however, it’s important to remember that the more you put down, the less you will owe on your mortgage. In addition, if you put down less than 20% as a down payment, you will likely have to pay private mortgage insurance until you have at least 20% equity. You can use your tax return funds to boost your down payment to put down as much as possible in your home.
If you need more of a boost for your down payment, the NC Home Advantage Mortgage™ with down payment assistance of up to 5% of the purchase price from the NC Housing Finance Agency may be able to help. Learn more about the affordable mortgage options available from the agency at www.HousingBuildsNC.com.