For most people saving money each month toward a long-term goal is difficult. Even committed savers can get thrown off track when unexpected problems or opportunities arise. The dream of homeownership can continue to get pushed back in favor of more immediate needs. The tax refund can be a way to meet their saving goals for many of these potential homebuyers.

A tax refund is easier to see as a meaningful dollar amount because it’s received in a lump sum. For example, the average IRS refund in 2019 was almost $3,000. This can be a great bonus when added to an already growing savings account.

A tax refund can also be used to increase your credit score in addition to adding to your down payment fund. Debt accumulation and use is the largest factor in determining a borrower’s credit score (FICO). A low FICO score can result in thousands of extra dollars in interest and origination fees when getting a home loan. Strategically reducing the debt ratio can add borrowing power to a potential buyer. Lowering the cost of the loan and allowing more of the monthly payment to go toward the home itself instead of interest.  

It’s tax refund time so consider how your check can help you achieve your homeownership goals. 

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