It happens every year about this time—some car dealer comes out with an offer to double your tax refund if you use it as a down payment on a new vehicle. Some will even do your taxes for you. It’s pretty slick marketing.
However, with dealer incentives from the manufacturer and fees made from the banks, the dealer will often try to convince you to over-finance in order to more than cover that “fantastic” offer.
But for potential new home buyers who will be facing the challenges of this spring’s home buying season, there are much better uses for those tax return dollars. While paying down some credit card or other debt can help, a larger down payment, paying closing costs that might otherwise be financed, or using that tax return to buy down the rate on that new mortgage can all have a significant positive impact on that borrower’s home financing situation.
There are so many ways to look at how that tax return might best serve a borrower’s individual situation; each person is unique. Some may be better off lowering their loan amount and monthly payments to qualify. Others may be better served by lowering their rate so they’re able to borrow more without increasing that monthly payment.
The best example is using that tax return to buy down the rate just a quarter point, which can increase that borrower’s buying power by $8,000 to $10,000. That is significant in a competitive housing market with rising prices.
Let an Embrace loan officer invest the time and energy working through all the options available to your clients—we can help them determine how to best use their tax return to get into that new home. Getting to know them now will allow us to be flexible if their wants, needs, or desires change and they need to be able to easily change direction with their financing to buy that dream home.