How to Use Your Tax Refund to Buy a Home
- Author: Noah Koch
- Posted: 2026-02-10
Whether your refund is a few hundred dollars or several thousand, here are three smart ways to use those funds to become a homeowner sooner.
1. Grow Your Down Payment
The down payment is often the biggest hurdle for people buying a home. Using your tax refund to pad your savings can help you reach your goal much faster.
You don’t always need a 20% down payment, either. There are special programs, such as Freddie Mac’s Home Possible® and HomeOne® mortgages, that allow you to buy a home with as little as 3% down.
You can also look into down payment assistance programs in your area or speak with a housing counselor to see what financial help is available to you.
2. Cover Your Closing Costs
Before you get the keys to your new home, you have to pay "closing costs." These are fees paid to your lender, your real estate agent, and other professionals involved in the sale.
Generally, you should expect to pay between 2% and 5% of the home’s purchase price in closing costs.
3. Lower Your Interest Rate (Discount Points)
When you get a mortgage, your lender might give you the choice to "buy down" your interest rate using discount points.
One "point" usually costs 1% of your total loan amount. By paying this fee upfront with your tax refund, you can secure a lower interest rate for the life of your loan.
While this might not always save you a huge amount of money in the long run, it can lower your monthly mortgage payment, making your month-to-month budget easier to manage.
Summary
Your tax refund is a great tool to help you cross the finish line into homeownership. Whether you use it to lower your monthly payments, cover closing fees, or build your down payment, it can bring you one step closer to owning your own home.
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Need help with your down payment? Find resources and assistance here!
