Invest in your future: Put your tax refund toward home ownership

Invest in your future: Put your tax refund toward home ownership

By Dawn Whalen

Whalen Realty Group at F.C. Tucker Company

The average tax refund checks over the past few years hovered around $3,000. Although it’s predicted that 2022 tax refund checks may be less than last year due to the end of pandemic benefits, potential homebuyers can still use that extra money to invest in their future. Many people shopping for a home use their tax refund to help with a down payment or pay for closing costs.

Tax refund as a down payment

The average homebuyer will pay 5 to 20 percent of a home’s purchase price as a down payment. As a reminder, buyers who put down 20 percent are not required to carry mortgage insurance. Mortgage companies carefully review a borrower’s finances because they need proof that the homebuyer can afford the property and make payments. As a result, a majority of lenders require a paper trail showing the buyer’s finances for a minimum of 60 days, or the most recent two months of statements.

Although most lenders need evidence that the down payment money has been available in the bank for at least 60 days, there are a few exceptions. The first is the tax refund. If a homebuyer can show that a deposit was made, or a check was received from the U.S. Treasury Department then that money is acceptable as a source of funds for use toward a down payment. The second exception is when money is paid to the buyer from the sale of personal property, such as a car or house. For example, if the home buyer intends to use money received from recently selling their home, those funds are approved for use on a down payment. The third common exception is an insurance payout. As long as the home buyer can show that the bank deposit or check was from a licensed insurance company, the money is approved for a down payment.

Pay closing costs with a tax refund

Buying a home can be expensive, so using money from a tax refund is a popular method home buyers use to help offset some of the costs. Closing costs usually range between 2 and 5 percent of the home’s purchase price, which, added to the down payment, can require a buyer to provide a sizeable sum of money before ever receiving the keys to the property. The charges and fees included in closing costs can vary between transactions, but for a majority of transactions, these costs include title insurance, attorney fees, realtor fees and possibly appraiser, survey and inspection fees. Depending on the price of the home, a tax refund check could cover all or a portion of the final closing costs.

Tax season is among us, and refunds will be making their way into mailboxes and bank accounts soon. Anyone looking to purchase a house this year may want to consider saving their refund check to invest toward the biggest purchase they’ll likely make in their lifetime, a home.

Dawn Whalen is owner of Whalen Realty Group, at the F.C. Tucker Company, and has worked in residential real estate for more than 17 years. She’s a licensed realtor, broker, is a member of MIBOR, and founder of Whalen’s Heroes, which provides funding to purchase service animals for veterans. She can be reached at

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