Getting a Tax Refund? Here Is Exactly How To Put It Toward a Home.
If a tax refund is coming your way this year, it represents one of the most practical opportunities to accelerate your path to homeownership. Most people deposit a refund and watch it slowly disappear into everyday expenses. Buyers who are strategic about it use it as a launching pad. Here is how.
Refunds Are Running Higher This Year
Good news before we get into strategy: IRS filing season statistics show the average individual tax refund is running approximately 11.1% higher this year than last year. Your exact amount will vary based on your income, withholding, and deductions, but any extra money coming in is worth deploying thoughtfully, especially when homeownership is on your horizon.
The Three Smartest Ways To Use a Tax Refund When Buying a Home
According to Freddie Mac, there are three primary ways buyers can put a tax refund to work in a home purchase, and each one addresses a different part of the affordability challenge.
The first is using it toward your down payment. Saving enough for a down payment is consistently the most commonly cited barrier for first-time buyers. A tax refund can meaningfully close that gap faster than regular monthly savings alone. And it is worth knowing that you may not need as much as you think. Depending on the loan type, down payments can be significantly lower than the 20% figure most people assume is required. VA loans can require zero down for eligible Veterans, which we covered in full in What Most Veterans Don’t Know About Their VA Home Loan Benefit.
The second is applying it to closing costs. Closing costs typically run between 2% and 5% of the purchase price and catch many buyers off guard. Using your refund to cover or reduce closing costs keeps more of your savings intact and makes the total upfront cost of buying significantly more manageable.
The third is using it to buy down your mortgage rate. Paying points upfront to lower your interest rate is a strategy that makes particular sense when rates are elevated and you plan to stay in the home long enough to recoup the upfront cost through lower monthly payments. Ask your lender to run the breakeven analysis so you know exactly how long it takes for the buydown to pay for itself.
Combining Your Refund with Other Strategies Multiplies the Impact
A tax refund works even harder when it is part of a broader plan. For buyers exploring co-buying as a path to ownership, Could Co-Buying Be the Answer for Some First-Time Buyers explains how combining incomes can dramatically change what is affordable. For buyers who have been deterred by affordability concerns more broadly, The Truth About Home Affordability Today breaks down why the picture is more manageable than most people assume. And for buyers wondering whether the current rate environment changes the math, our Mid-Year Housing Market Reality Check gives you the full current picture.
Know Your Number Before the Refund Arrives
The most important step is figuring out exactly what you need to make a purchase happen. That means getting pre-approved or at minimum having a conversation with a lender to understand your debt-to-income ratio, what loan programs you qualify for, and what the actual gap is between where you are and where you need to be. Once you know that number, you can see whether your refund closes it, reduces it, or simply gets you meaningfully closer on a clear timeline.
What This Looks Like for Buyers in South Jersey
In South Jersey and the Camden County area, homes at entry-level price points are still available, and the combination of a modest down payment, smart use of closing cost assistance, and the right loan program can put ownership within reach for buyers who thought they were still years away. Our Step-by-Step Guide to Buying Your First Home in NJwalks you through every step of the process. And our Top Neighborhoods to Buy a Home in Camden County shows you where buyers are finding the best value right now.
Reach out to the MH Global team. If your refund is on the way, let’s figure out exactly how to put it to work toward your home purchase.
