3 Ways to Use Your Tax Refund to Buy a Home

• Author: Marsha Jacobs
• Posted: 2026-02-11

Buying a home comes with many upfront costs, but your annual tax refund can be a great way to boost your budget.

Whether your refund is large or small, here are three ways you can use that money to help you become a homeowner.
 

1. Save for a Down Payment

For many people, saving enough money for a down payment is the biggest hurdle to buying a home. Using your tax refund to grow your savings can help you reach your goal much faster.

You may not need as much as you think. While many people believe they need 20% down, there are programs (like Freddie Mac’s Home Possible and HomeOne) that allow you to buy a home with as little as 3% down.

You can also look into down payment assistance programs in your area or speak with a housing counselor to see what options are available to you.
 

2. Pay for Closing Costs

When you get to the final step of buying a home, you have to pay "closing costs." These are fees paid to your lender, your real estate agent, and other professionals involved in the sale.

Closing costs usually range between 2% and 5% of the home’s purchase price. For example, on a $350,000 home, you might pay between $7,000 and $17,500 in fees.

Because these costs vary depending on where you live, using your tax refund can provide a helpful cushion to cover these expenses.
 

3. Lower Your Interest Rate (Discount Points)

You can use your refund to "buy down" your interest rate through something called discount points. One point typically costs 1% of your total loan amount. By paying this money upfront to your lender, you get a lower interest rate on your mortgage.

A lower interest rate means your monthly mortgage payment will be smaller. While some research suggests that buying points doesn't always provide a massive financial gain over time, it can be a smart move if your goal is to make your monthly budget more manageable.
 

Summary

Your tax refund doesn't have to be "extra" spending money—it can be a tool to help you secure a home.

Whether you use it for your down payment, closing costs, or to lower your monthly payments, it can bring you one step closer to getting the keys to your new house.

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Find out if you're eligible for more housing support here!