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Tax season is upon us. For many Americans, this is a happy time as they are expecting to receive a sizable income from their tax refund. Some folks choose to use this refund to pay off debts, build up savings, go on a vacation, or simply buy themselves a new toy. You may be shocked to learn that many first time homebuyers do not know they can use their tax refund to help purchase a home. Depending on the size and price of the home, this can make up most if not the all of the down payment costs.
When buying a home, new borrowers are highly encouraged to utilize their tax refund versus applying for a down payment assistance program. Down payment programs may seem attractive but come with many rules and restrictions that could harm a homeowner down the road. Below is a list of common restrictions or disadvantages if you choose to enroll in a down payment program:
- Can work as a second mortgage on your property
- Forces you to live in the home for a specified time or else you will have to pay back the down payment in full
- Can keep you from refinancing your home in the future.
- Funds can dry up depending on the budget and number of applicants
Make sure to work with a quality REALTOR® and a seasoned Loan Advisor to determine if you are financially prepared to purchase a home.