A common reason people rent is they cannot afford to put a down payment on a house. They know that their monthly payments will go down when they buy, they understand the benefits of equity over time, and they know the pride associated with home ownership, but coming up with the down payment is too difficult, especially when paired with closing costs, cash reserves, and the cost of moving.

But what many people do every year is use a tax return for a down payment and closing costs. In essence, then, what these people are doing is letting Uncle Sam collect additional taxes each pay check, to get back a nice return in April that can be used as a lump sum toward a house. It helps avoid the difficulties associated with saving month to month, and it is often a pretty sizable chunk of change refunded.

Tax returns are considered your assets the moment they hit your account, and are acceptable for a down payment, to pay closing costs, and to hold in your account to show cash reserves, if needed. And with tax time coming around, if you have been thinking about buying a house, especially if you are a first time home buyer, it is important to discuss how your tax return could change your home buying prospects.

If you have any questions about buying a house with your tax return as a down payment, please contact me. And if you have anything to add about using a tax return as a down payment, please leave a comment.