How To Use Your Tax Refund During the Home Financing Process

If you’re planning on receiving a tax refund, don’t miss out on putting that extra cash to good use! When it comes to buying a new house, having cash set aside is essential – and the more you have at the ready, the better. While there are some great mortgage programs that require little to no down payment, there will inevitably be upfront expenses that you’ll need to pay out of pocket when purchasing a new home – which is where your tax refund can come into play! Here are a few of the expenses for which you may need to have cash saved:

Down Payment

With a multitude of mortgage programs to select from, there’s bound to be one that meets your financial needs. While there are programs that offer no down payment, there are often other fees and expenses that come with these programs, so be sure you know what to expect. Below, we’ll briefly discuss a few of the most popular loan programs:

  • FHA – The Federal Housing Administration backs this loan program and requires a 3.5% down payment when purchasing a home. Mortgage insurance is required on all FHA loans and is factored into your monthly payment.
  • USDA – This loan is backed by the United States Department of Agriculture and requires no down payment for buyers purchasing in a qualifying rural area. Mortgage insurance is factored into your monthly payment, and there are certain income limitations for those who qualify for this type of loan.
  • VA – The Department of Veterans Affairs backs this loan, which is geared toward qualified US veterans or surviving spouses. It has no down payment requirement, but there is a required funding fee that is often a percentage of the loan amount.
  • Conventional – This type of loan requires as little as 3% down. Mortgage insurance will be required when putting down less than 20%; however, once you have gained over 20% equity in your home, your mortgage insurance can cease.

Closing Costs

Aside from a down payment, other fees must be paid upfront when closing on your new home. ‘Closing costs’ is a broad term that encompasses many charges included as part of the homebuying process. You can expect your closing costs to range from 2-4% of the purchase price, and reflect things like the inspection, appraisal, lender fees, attorney fees, title search, prepaid taxes, and insurance, among others. Having cash from a tax refund can come in handy to put toward these out-of-pocket costs!


You may be surprised to learn that some utility companies require you to pay a deposit upfront when having your water, electricity, etc. switched to your name after closing on your new home. It can range from a small fee to hundreds of dollars and is often based on your overall credit score and history. Setting aside some of your tax refund can go a long way toward covering these deposits.


Buying a fixer-upper? Having cash on hand to make updates will certainly come in handy. This is especially true if you’ve already spent a big portion of your savings on your down payment and closing costs! If it’s not necessary to complete all projects at once, choose how you’d like to prioritize them and plan accordingly. Perhaps you can make a goal to set aside a portion of your tax refund to put toward home projects!

Maintenance Costs

One thing you’ll learn quickly once becoming a homeowner is that things break from time to time, so it’s good to have a little bit of cash available when those moments happen. It’s a good idea to set aside at least 1% of your home’s value each year to cover any routine or emergency maintenance costs.

When you’re ready to begin your home search, C&F Mortgage will be there for you every step of the way. From understanding your financial obligations to finding your dream home, our team of local industry experts is ready to lead you on your homebuying journey – get in touch with us today!

The information contained herein (including but not limited to any description of C&F Mortgage Corporation and its lending programs and products, eligibility criteria, interest rates, fees and all other loan terms) is subject to change without notice. Restrictions apply. This is an advertisement and not a commitment to lend. Must be actual funds from IRS. C&F Mortgage Corporation NMLS# 147312 Equal Housing Lender.

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