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At the end of every financial year, a taxpayer is entitled to a tax refund if the amount of withholding and estimated taxes he or she paid exceeds the actual amount that he or she owes. This year, the IRS issued around $13 billion worth of tax refunds, spread to approximately 20 million entities. The average refund is about $2,050.

If you are planning to buy a home or refinance your existing property, your tax refund could help you pay for the cost of purchase or refinance.

Here are ways to use this money to get started with your journey to homeownership:

PAY FOR THE DOWN PAYMENT

It is a common misconception among borrowers that you need a 20 percent down payment when you buy a house. In today’s mortgage market where mortgage programs are increasingly being diversified to cater to different types of consumers and borrower types, that belief is simply becoming obsolete.

Yes, it is ideal for a borrower to put down a 20 percent down payment – and many lenders still prefer the old ways – but that does not mean you cannot qualify for a mortgage when you fall short of this requirement.

For home financing programs under Freddie Mac and Fannie Mae, you can now put down 5 percent of the home’s sale price as down payment. That is typically the minimum. Other lenders accept 10 percent down payment as well. That means if you buy a house worth $250,000, you will be paying $12,500 to $25,000 minimum as down payment.

If you can qualify for a government-backed mortgage such as FHA, VA, and USDA loans, you will have little to no problem with down payment. The minimum down payment requirement for FHA loans, for example, is only 3.5 percent. VA and USDA loans do not require its borrowers to put any down payment.

You can use the proceeds of your tax refunds to cover for some of the down payment requirements. If you are still having difficulty, you can apply from over 2500 homeownership assistance programs available to borrowers nationwide. Consult your financial advisor or your originator about down payment assistance programsthat might be available to you.

COVER THE COST OF CLOSING

Closing costs can account to 3 to 6 percent of the purchase price of the home. The charted average for 2016 is around $2,000. If your tax refund is near the reported average by the IRS, then you can easily cover for the cost of closing, which is one of the most expensive parts of home refinance or purchase next to the down payment.

PAY FOR DISCOUNT POINTS

Paying for discount points lowers your interest rate. A single point deduction is a one percent reduction of the loan. This single percentage is payable at closing. This may be a large one-time sum, but take note that seemingly small reductions in interest can help you save thousands of dollars on interest payments in the long run.

Just see to it that you will be staying in your house long enough to recoup the cost, else you will end up paying an upfront reduction for nothing.

Your tax refund could be your saving grace from the expensive upfront cost of home refinance or purchase. Work it to your advantage!