5 mistakes to avoid when buying your first home

(BPT) – Buying a home for the first time is comparable to the first time you ride a bike. You can learn about how it works from your parents and observe it from a distance, but you really won’t know the ins and outs until you actually sit down on the bicycle and start riding.

Like most beginners, first-time homebuyers will likely make a few mistakes as they initially go through the home-buying process in the upcoming year. Here are five mistakes first-time homebuyers often make, and how to best avoid them.

1. Waiting too long to make an offer

One of the biggest mistakes first-time homebuyers will make in 2017 is simply waiting too long to get into the real estate market, according to Jay Carr, a senior loan advisr for RPM Mortgage in Newport Beach, California. Because the rates look like they’re going to continually increase over the year, it’s important for buyers to get in as early as they can so that they can avoid paying more later on. If you see a home that you’re interested in and you have been thinking about entering into the market for some time, don’t hesitate too long.

2. Trying too hard to get less than the asking price

Many first-time buyers are younger, tech-savvy and are comfortable researching homes on their own. Overall, these are positive traits in a buyer. However, because these buyers are typically self-sufficient when it comes to other purchases, they often think they know best when it comes to what price they want to offer.

“Buyers rely too much on what they see on the internet instead of the good advice of what they would hear from a real estate agent,” Carr says.

Of course sometimes it pays off to be bold in an offer (in that you get to pay a lot less than the asking price), but often it can end up that the buyers are negotiating themselves out of a deal. It’s important to pay attention to your real estate agent, who is a seasoned professional, when it comes to putting in an offer so you don’t offend the seller and lose the house you want.

3. Not exploring all your financing options

Carr says many first-time buyers have grown up thinking that they need to save up for a 20 percent down payment before they can enter the housing market. While it is always great to have as much money to put down as possible before you purchase a home, it’s important to consider many of the new options available today.

One option is a home ownership investment such as the Unison HomeBuyer program, which typically provides up to half of the down payment you need. The money is an investment in the home, not a loan, so there are no interest charges or monthly payments. This new type of financing — which works in combination with a traditional 30-year mortgage — can offer greater flexibility and control to the home buyer. It allows you to cut the time needed to save for a down payment in half, lower your monthly payments and avoid mortgage insurance, or increase your purchasing power so you can buy the home you want.

4. Wanting the dream house right away

Everyone has a picture in their minds of what their first home will look like. Whether you envisioned a craftsman bungalow near all your favorite bars and restaurants or a classic ranch-style home with tons of land and no neighbors, chances are you’re going to have to trade up to that dream home from your first starter home.

“If you really like the house, you probably can’t afford it. If you think the house is just kind of below what you want it’s probably right in your price range. Get in the market rather than wait to get the dream house,” Carr says.

Carr advises those in the hunt for their dream home to focus on becoming homeowners now and to wait on their dream home until they have built up equity and have higher incomes in the future.

The median tenure of a homeowner in 2017 is about 10 years, but for the 20-year period before that it was only six. Believing that this won’t be your last house can take a bit of pressure off the home being perfectly suited for you.

5. Not having your own representation

Another mistake a first-time homebuyer can make is not having their own representation (meaning that they use the seller’s agent as their own buyer’s agent). While this is not always a bad situation, Carr cautions buyers to be careful that they have selected a good and trustworthy real estate agent that is looking after their best interests. In other words, you don’t want to pay an unfair price because someone is looking after their own best interest.

To learn more about the Unison HomeBuyer program and how it could help you, visit www.unison.com/homebuyer.

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Husband and wife talking about finances

5 reasons why talking about money can enhance a relationship

(BPT) – Thinking about combining finances with your significant other? Whether you’re getting married or just thinking about getting serious, talking about money can help couples understand each other and avoid unhappy surprises down the road. Here are five reasons why talking about money can enhance a relationship.

It makes couples happier.

Talking about things like spending, saving and debt may sound business-like and unromantic, but financial experts agree that money is a frequent topic of arguments in many relationships. In fact, according to a survey by the American Psychological Association, almost a third of adults with partners reported that money is a major source of conflict in their relationship.

“What I see when talking with couples is that learning how to resolve money disagreements – and there will be disagreements – helps build important relationship skills,” says Daniel Prebish, director of Life Event Services with Wells Fargo Advisors. “Those skills will be valuable both at the beginning of a relationship and likely for a couple’s entire time together.”

It helps couples connect by understanding what’s going on.

Couples should discuss pros and cons of combining finances versus keeping finances separate. According to research by Wells Fargo & Company, about half of couples choose to combine accounts, while the other half prefers separate accounts. Regardless of where you and your significant other fall in this spectrum, both people in a relationship should understand how their financial habits impact – positively or negatively – the life they are building together.

It helps couples track their short and long term financial goals.

Be open with your significant other about your full financial picture. Questions that can help open the door to meaningful conversations include:

1. Are we paying ourselves first?
2. Do we have a safety net?
3. Are we paying all our bills on time, every time?
4. Have we reviewed our insurance needs in the last year?
5. Do we track our spending to know where our money is going every month?
6. Are we paying down high-interest-rate debt first?
7. Do we know where our credit stands?
8. Are we saving for retirement?

It helps couples afford the “extras” that make life fun.

Building a solid financial future shouldn’t mean forsaking enjoying life. When couples have a common understanding of how they’ll prioritize and manage their day-to-day finances like housing costs, grocery and utility bills, it’s easier to figure out where splurges fit in.

It helps avoid financial surprises.

Hearing your friends shout, “happy birthday” is a welcome surprise. What’s not welcome is suddenly discovering you can’t afford to pay this month’s bills or that retirement is farther away than a pot of gold at the end of the rainbow. Being up front about money issues and sharing complete financial information with your significant other helps avoid financial surprises that can add unnecessary stress to a relationship.

While discussing money may not feel romantic, it certainly is emotional. So how do you get started? Here are tips:

1. Admit the conversation can feel awkward, but commit to having it anyway.

2. Pick a mutually agreeable time. Your candle-lit Valentine’s dinner may not be the right setting. Pre-arranging the conversation will help ensure both people are mentally prepared.

3. Be open with your significant other. Share your values and opinions about spending and savings habits and goals you would like to achieve together.

4. Work at it. Commit to an annual meeting to talk about money, credit and whether you’re on track to achieve your financial goals.

By opening the lines of communication, you can get on the same financial page before joining financial forces.

(This article was written by Wells Fargo Advisors and Consumer Lending)

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. Wells Fargo Consumer Lending Group provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.

Findings were a part of the 2016 Wells Fargo &Company’s “How American Buys and Borrows” survey. Over 2000 American adults ages 18 and older were surveyed. Survey results were not published in their entirety.

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4 reasons you should review your beneficiary designations

(BPT) – Baby boomers have been planning and saving for retirement for decades. They are also planning their legacy — creating wills, trusts and other sophisticated estate planning strategies to transfer their wealth to the next generation.

However, most people may not realize their IRAs and qualified retirement plans — a large part of their estate — are not subject to probate nor affected by the terms of a person’s will. These assets will pass to the next generation determined solely by the client’s beneficiary designation form. Accordingly, the beneficiary designation form is one of your client’s most important estate planning documents but it is often overlooked when creating a legacy plan.

Here are some common beneficiary designation mistakes to avoid:

Estate as a beneficiary

Many clients unintentionally name their estate as beneficiary of their retirement accounts. Some clients will actually direct their retirement assets to be paid “pursuant to the terms of my will.” Other clients simply fail to complete their beneficiary designation form or forget to name a new beneficiary after a beneficiary dies. When this happens, the assets are usually paid to the client’s estate by default, which is probably the worst beneficiary for IRAs and retirement plans.

IRAs and qualified retirement plans — assets that normally avoid probate — will become subject to probate when paid to the estate. The probate process can be long, cumbersome and expensive. Further, these assets may have to be liquidated and paid to the estate within five years after the client’s death. While individual beneficiaries can elect to have IRA assets paid over their lifetime, thereby “stretching” their tax liability over many years, estates cannot.

Finally, estates are subject to a much higher income tax rate than individuals. This can result in more money going to the IRS than necessary. To avoid this mistake, make sure your clients have an up-to-date primary and contingent beneficiary designated for all their retirement accounts.

Trust as a beneficiary

Many attorneys like to use trusts to facilitate an effective transfer of wealth and maximize all available gift, estate and generation skipping tax exemptions. However, there are several dangers to having retirement assets paid to a trust.

First, the IRS generally requires the assets to be paid to the trust within five years after the death of the client. The “stretch” rules generally do not apply to trusts unless the trust is drafted to be a “look through” trust. If the trust is a “look through” trust, the IRS permits you to “look through” the trust and “stretch” the IRA to the trust over the life expectancy of the oldest trust beneficiary. Trusts that fail to be a “look through” trust include those that have beneficiaries that are not individuals, such a charity, estate or another trust.

Second, it can be expensive to establish and maintain these trusts. If an IRA is “stretched” to a “look through” trust, a lifetime of legal, trustee and administrative fees can significantly reduce the amount the ultimate beneficiaries will receive.

Third, trusts become subject to the 39.6 percent tax rate (currently the highest) as soon as the income exceeds $12,400. By comparison, married taxpayers filing jointly do not reach the 39.6 percent tax rate until their income exceeds $366,950. That means if the IRA is worth more than $12,400, more than a third can be lost to the IRS. Unless there is a compelling non-tax reason to name a trust as beneficiary of an IRA or retirement plan, you should help your clients avoid making a costly mistake. Encourage your client to speak with their estate planning attorney about the pros and cons to naming a trust as a beneficiary of a retirement account.

Ex-spouse as a beneficiary

Few people really intend to leave IRA and retirement assets to an ex-spouse, but this happens all the time. People fail to update their beneficiary designation form after a divorce. Often, they are under the mistaken belief the divorce decree will automatically negate their prior beneficiary designations. Divorce decrees, court orders and wills generally have no affect on a beneficiary designation.

“Per Stirpes” or “Per Capita”

IRA and retirement assets are not always distributed as intended. Most IRAs will allow the owner to designate multiple beneficiaries. For instance, it is common for an IRA owner to designate his or her children as equal beneficiaries. If one beneficiary predeceases the owner or “disclaims” the inheritance, the remaining primary beneficiaries will generally receive the balance of the IRA and not the children of that deceased beneficiary.

For instance, assume Dad has an IRA he wants to leave to his two children Sue and Tom. Sue and Tom also have children of their own. If Tom were to die before Dad, Sue would inherit Tom’s share and nothing would go to Tom’s children. This is called a “Per Capita” distribution. If Dad wanted to make sure Tom’s share will benefit Tom’s family, Dad should make a “Per Stirpes” designation. This means Tom’s half will be shared equally by Tom’s children.

By conducting a review of your clients’ IRAs and retirement plans, you can help your clients avoid costly mistakes and assure the right beneficiaries inherit these hard-earned assets.

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