Merry Christmas, homebuyer! Don’t cash Mom and Dad’s check yet! Your loan could be denied if the money isn’t carefully documented.

Why? Gifts can cause confusion. Is your parents’ money a gift or a loan? Unless the terms are clearly defined, don’t mix the gift with your own funds. It alters your bank statements and raises your income both of which could muddy your financial picture.

Lenders require a paper trail for all monies, so no phone deposits. They also limit the size of gifts in relationship to the total down payment. Some loan programs require the borrower to contribute at least 3% to 5% of the down payment if the down payment is less than 20%, while other programs allow the entire down payment to be supplied by a gift.

To avoid questions, provide a certified down-payment gift letter or sign an affidavit that explain:

• The amount of the gift, accompanied by a corresponding cashier’s check, including a photocopy of the check
• The name and address of the gift-giver and relationship the gift-giver has to the homebuyer
• The purpose of the gift – to be used only as a down payment on the subject property, complete with the property’s address
• A statement confirming that the gift is not a loan, and does not need to be repaid
• Signatures of the borrower and the gift-giver

If you’re planning to use a gift as part or all of your down payment, ask your lender how to meet all the appropriate requirements.

Rising home prices and low inventory is making it difficult for  buyers to find the perfect home.  What’s a great strategy?  Buy a fixer upper!

There are real advantages to buying a home that needs work. Unloved or outdated homes don’t attract as many buyers, allowing you to mine the gold under the dirt. You’re getting the home at a discount compared with the rest of the neighborhood. You’re not paying top dollar for someone else’s improvements and you can make the home your own. You’ll wow your friends and family with the result.

Shop for the best neighborhood you can afford.
Look for the worst home in the best neighborhood. Usually that home is older, smaller and not as well maintained as other homes. You’ll build instant equity when you improve the curb appeal, so the home looks like it belongs with its neighbors.

Ignore the cosmetics.
 Don’t stress over ugly paint, wallpaper, shag carpet or gingerbread trim.  Your Berkshire Hathaway Home Services network professional can help you distinguish features that matter and which are easy to change.

Consider the bones.
You need to know whether or not you can open a kitchen to the den or add on a bathroom or other square footage. These updates can be costly but they add value to the home. Talk to your lender about loans that pay for remodeling such as FHA’s 203(k) program or Fannie’s HomeStyle Renovation Mortgage.

Many homebuyers prefer to move in the summer, but they’ll pay much more on average than if they bought a house in the fall or the winter.

Summer is typically the most expensive time to buy.  Buyers find the largest number of home choices during April, May, June and July but home sales prices – the amount a buyer actually pays – typically peak during these months because there is also more competition from other buyers.   This past spring and summer offered a strong seller’s market in the greater Lansing area with homes receiving multiple offers within only a few days of being listed – often above the asking price.  In a such a competitive seller’s market buyers are paying top dollar for the convenience of a summer purchase.

Sale prices fall in autumn. Home listing prices don’t fall dramatically once summer ends, but sale prices take a noticeable dip.  With fewer buyers shopping for homes during the months of September through December, sellers are less likely to be looking at multiple offers and are more willing to consider offers below the asking price.

Home sale prices are usually lowest in winter.  Statistics indicate that buyers shopping in January or February tend to save the most on the purchase price of a home.  Once spring arrives, prices and inventory begin to build up again.

Once you’ve determined how much house you can afford and the general price range of the homes you plan to look into purchasing, you can start building up a lump sum of money to use towards your down payment. Whether you’re starting from zero or already have a good amount saved up, there are several ways that you can save money up for a home down payment.

Automate It

Set up an automatic deduction to be taken out of each of your checks and to be deposited directly into a savings account that can be used to acquire money for your down payment. Many times people deduct up to 2 percent each check without it hurting monthly expenses and payments, and after a few months, you’ll have a nice sum of money built up!

Reduce Extra Expenses

Are you leasing a brand new, 2016 car? Or are you taking multiple out-of-state vacations a year? A great way to save up extra income is to reduce the amount of big-ticket items you are currently paying for. Maybe downsize your current vehicle or vow to take stay-cations this year so you can pocket the money you would normally be spending and use it towards a down payment.

Trim the Excess

Are you a gourmet coffee lover that likes to visit a coffee shop every morning? Or do you go out to lunch every day with your coworkers? As nice as all of these things are, by trimming back on how much you’re spending on the little things like food and drinks, you may find that you can quickly grow your savings account.

Make Additional Income

Whether it’s a hobby like baking and selling pies or coaching a high school sports team, there are ways to make a few, extra bucks outside your normal work hours that can help add to your down payment pool of money.

Start a Money Jar

It’s the old trick your parents used to use when they were trying to teach you about saving up money – piggy banks. Whether it’s a piggy bank, a jar or a drawer, you can stash extra money from your wallets and purses in one place and every week or so take it into the bank to add to the pool of savings. The benefit of this is that you can physically see your progress and how much you’re saving as time goes on, giving you more incentive along the way.

Everyone loves a good sale, but make sure you don’t go crazy with holiday shopping — because it could jeopardize your ability to close on a home purchase. After having received a preapproval on a home loan, you must be cautious with your finances. Going overboard with holiday shopping could kill the loan approval.

Don’t apply for new credit or accumulate new debt. It’s tempting to apply for a new store credit card offering added discounts on top of sale prices, but just filling out an application could be risky for your  credit profile. Opening a line of credit requires a credit inquiry, which could not only stall your mortgage loan application but also impact your debt-to-income ratio. It could make a lender believe you’re a greater risk than they originally appeared. Home buyers need to avoid any major purchases, such as furniture or a car, before the home buying process is complete.

Don’t transfer large amounts of money.   As a home buyer, you need to keep your money in one place as you await closing. Shuffling money between accounts can send red flags to lenders and make them concerned about undocumented funds or money troubles they may not have spotted beforehand.

Watch the gift money. If families are offering cash as holiday presents, you  need to be aware that this may put your mortgage applications at risk. Lenders will be scrutinizing your accounts looking for unusual deposits that are 50 percent or more of their monthly income. Lenders are also looking for any unusual withdrawals. Be prepared to explain any large deposits or withdrawals.

Buying a home is a dream come true for many people. However, for those that are entering homeownership for the first time, it is easy to fall into some of the most common first time home buyer pitfalls. These mistakes can be not only financially taxing but also emotionally. We’re revealing some of the most common first time home buyer mistakes to avoid in order to make buying your first home a smoother, easier experience.

1. Overspending
Everyone has a dream of what his or her first home will look and feel like. But for some, that means compromising finances to make that a reality. Emotions often get tied in the mix and lack of experience sometimes causes first time home buyers to spend more than they can afford.

To avoid making this mistake, it’s crucial that you meet with a mortgage lender to determine how much house you can afford and get a pre-approval. Calculate a budget mortgage based on your current earnings, not based on projected earnings in the future in case something happens.

2. Forgetting Extra Expenses
When you look at a listing online or in the property brochures, what you see is the selling price of the home. What you don’t see is the additional costs associated with the actual purchase of that home apart from the listing price. These items include things like closing costs, property taxes, homeowner’s insurance and HOA fees.

When you’re seriously considering purchasing a home, make sure you account for these added expenses in the long run. You don’t want to get blindsided when it comes to closing day.
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