Tax season isn’t something most people look forward to, but if you’re getting a refund check from the IRS, it could be your stepping stone to homeownership.

Whether you’re looking to buy your first home, move into something bigger, or build equity where you already live, your tax refund can help turn those plans into reality.

At The Harvard State Bank, we understand that buying a home is one of the biggest financial decisions you’ll ever make. As a local bank with deep roots in Illinois, we’re here to help you make the most of your resources, including that tax refund. Here are some smart ways to put it to work for your homeownership goals.

Strengthen Your Down Payment

A larger down payment can make a big difference when buying a home. While some loan programs allow for smaller down payments — FHA loans, for example, require as little as 3.5% — putting down more upfront can reduce your monthly mortgage costs and even help you avoid private mortgage insurance (PMI).

Say you’re purchasing a $250,000 home. A 3.5% down payment comes to $8,750, while a 10% down payment would be $25,000. If your tax refund brings you closer to that number, you could lower your mortgage balance and save on interest over time.

Cover Closing Costs

Many home buyers focus on the down payment but forget about closing costs. These fees — loan origination charges, title insurance, appraisals, and more — typically range from 2% to 5% of the home’s price. On a $250,000 home, that could mean anywhere from $5,000 to $12,500.

Applying your tax refund to these expenses can ease the financial burden at closing and help you start homeownership with more cash on hand.

Pay for a Home Inspection

A home inspection isn’t legally required, but it’s one of the smartest investments you can make before buying a house. A professional inspector can identify issues that might not be visible at first glance, from structural concerns to outdated electrical systems.

The cost of a home inspection varies but typically falls between $300 and $600. Using your tax refund to cover this expense can help ensure you’re making a sound investment.

Make an Earnest Money Deposit

When you find the right home, you’ll need to show the seller you’re serious. That’s where earnest money comes in. This deposit — usually 1% to 3% of the purchase price — is held in escrow and later applied to your down payment or closing costs.

A strong earnest money deposit can make your offer more competitive, especially in a market where multiple buyers are bidding on the same property.

Improve Your Credit Score

If homeownership is still a few months or years away, your tax refund can help you get financially prepared. Mortgage lenders look closely at your credit score when determining your eligibility and interest rate. A higher score can mean lower borrowing costs over the life of your loan.

Using your refund to pay down high-interest debt, such as credit cards, can reduce your debt-to-income ratio and boost your credit score. Even a small improvement in your score could help you secure a better mortgage rate.

Buy Mortgage Discount Points

If you’ve already saved enough for a down payment and closing costs, you might consider using your tax refund to buy mortgage discount points.

Each point costs about 1% of your loan amount and can lower your interest rate. For example, if you’re taking out a $200,000 mortgage, one point would cost $2,000. That upfront cost can lead to long-term savings by reducing the amount of interest you pay over the life of your loan.

Build a Home Maintenance Fund

Owning a home means being prepared for unexpected repairs. Appliances wear out, roofs need fixing, and plumbing issues can arise when you least expect them. Having a home maintenance fund can help you handle these costs without relying on credit cards or loans.

A good rule of thumb is to set aside 1% to 3% of your home’s value each year for maintenance and repairs. If you’re buying a $250,000 home, that means saving $2,500 to $7,500 annually. A tax refund can provide a solid starting point for that fund.

Fund a Home Improvement Project

If you already own a home, your tax refund could go toward upgrades that add value. Some improvements offer a strong return on investment, including:

• Energy-Efficient Windows: Can lower heating and cooling costs.
• Kitchen Updates: Even small changes, like new countertops or cabinets, can make a big impact.
• Bathroom Renovations: A modern bathroom can improve home value and comfort.

Before taking on a project, consider whether it will add long-term value to your home.

Refinance Your Mortgage

Your tax refund could help you refinance if you already have a mortgage. Lowering your interest rate or adjusting your loan term can save thousands over time, but refinancing comes with costs.

Lender fees, appraisal costs, and other closing expenses can add up. Using your tax refund to cover these costs can make refinancing more accessible and cost-effective.

Save for Future Homeownership

If you’re not quite ready to buy, that doesn’t mean your tax refund can’t help. Setting the money aside in a high-yield savings account can put you in a stronger position when the time comes to make a move.

At The Harvard State Bank, we offer a range of savings options to help you grow your funds safely while keeping them accessible for when you’re ready to buy.

Schedule a Consultation Today

A tax refund can be a powerful financial tool when used strategically. Whether you’re buying a home this year or preparing for the future, putting that money to good use can bring you one step closer to your homeownership goals.

At The Harvard State Bank, we’re here to help you make smart financial decisions that fit your needs. If you’re ready to take the next step toward homeownership, visit one of our branches or give us a call: (815) 943-4400.

Our team is here to guide you through the process with local expertise and personal service.