5 Mortgage Rules You Should Know by Heart

If you’re buying a house or refinancing your loan, here’s what you need to know.

For millions of Americans, a mortgage is the biggest debt they’ll ever have to repay. Unfortunately, as anyone who’s ever gone through the process can attest, mortgages involve pages and pages of legal documentation that can be nearly impossible for most people to comprehend. To simplify mortgages, there are some basic guidelines that anyone can learn and commit to memory. Below, we’ll go through five useful rules about mortgages.

Rule 1: Keep your mortgage payment to 25% or less of your income.

Housing costs are typically the largest expense item in your household budget, but that doesn’t mean you can afford to break the bank. Lenders look closely at your income to determine how much you can truly afford to pay for a monthly mortgage payment, and one simple guideline they use is to take your available income and multiply it by 25%. If a mortgage would require larger payments than that, after taking into account both the loan itself and associated payments like property taxes and insurance, then a lender will generally be less comfortable in giving you the loan.

Rule 2: Avoid private mortgage insurance by making a 20% down payment.

Mortgage lenders typically require borrowers to obtain private mortgage insurance or PMI if they make a down payment that’s less than 20% of the value of the home. PMI protects lenders against the risk that the value of the home will fall below the outstanding principal balance on the mortgage, leaving the borrower “underwater” on the loan. For borrowers, however, it’s an added expense that essentially provides no value to them. As difficult as it can be to save up a 20% down payment, the hundreds of dollars in PMI that it will save you could make the difference between being able to afford a slightly more expensive home and having to settle for less.

Rule 3: Understand how adjustable rate mortgages work and what risks are involved.

Fixed mortgages are easier to understand because the interest rate that they charge never changes, so you can count on monthly mortgage payments remaining constant throughout the lifetime of your loan. That’s not the case with adjustable rate mortgages or ARMs, which only remain fixed for a set period. Most lenders refer to ARMs with two numbers, such as 5/1. The first number refers to how long the initial rate remains in place. The second number describes how often the rate adjusts after the initial rate ends. For a 5/1 ARM, the initial rate stays in place for five years, and then changes every year after that. When rates change, they’ll also change your monthly payment, so make sure you understand the illustrations that your mortgage documents will provide so you don’t get a nasty surprise at the end of the initial term.

Rule 4: Know whether you’ll actually be able to deduct your mortgage expenses.

Many people look forward to being able to deduct mortgage interest, property taxes, and other key expenses of owning a home. But one thing to keep in mind is that all of these tax breaks are only available if you itemize deductions on your tax return. If the cost of your interest and taxes isn’t enough, when combined with other itemized deductions, to exceed the standard deduction you’re entitled to receive, then buying a home won’t do you any good from a tax perspective. That shouldn’t necessarily stop you from making a purchase and taking out a mortgage loan, but it should inform you as to the true cost of doing so.

Rule 5: Be careful diverting retirement money toward a home purchase.

The tax laws governing retirement accounts allow you to make withdrawals from an IRA of up to $10,000 toward a first-time home purchase without having to pay the typical penalties for early withdrawal of your retirement savings. However, just because you can use IRA money toward a home purchase doesn’t mean you should. First, even though you won’t owe penalties, you will owe income tax on the money you withdraw, potentially leaving you with a big tax shortfall at the end of the year. More importantly, diverting that money from your retirement savings will leave you in a less favorable position in the long run with the size of your nest egg. As a potential source of down payment money, tapping an IRA can seem like a smart move, but be aware of the long-term consequences before you pull the trigger.

Buying a home will probably be the biggest purchase you ever make. Being smart about the debt you incur to buy your home is essential to avoid the mistakes that so many homeowners made during the financial crisis. Keeping these rules in mind will take you a long way toward a better understanding of the mortgage process and your mortgage loan.

Source:  http://www.fool.com/investing/2016/05/28/5-mortgage-rules-you-should-know-by-heart.aspx?source=iedfolrf0000001

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20247 W Hollyhock Street Buckeye, AZ 85396

$658,995

3 Beds

3 Baths

2,630 SqFt

Status Active

MLS # 6717674

Property Type Single Family Residence

Price Type --

8760 sqft lot - Optional Guest Suite - Gourmet kitchen, quartz countertops, full tile backsplash, white cabinets, pendant lights at island, stainless steel appliances w/pyramid hood & gas cooktop - Multi-slide doors at great room - Walk-in shower at primary bath - Pre-plumb locations at laundry room, soft water loop, gas to patio - Wood laminate floors throughout except for carpet in bedrooms & 12 x 24 tile in bathrooms - Matte black fixtures throughout - Ceiling fan pre-wires at bedrooms, patio and great room - 10-foot ceilings - Double gate - Two-tone paint - Garage service door - Cabinets & wet bar sink w/beverage center at guest living room w/entry door into side-car garage.

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18229 E Spring Valley Court Rio Verde, AZ 85263

$658,013

2 Beds

2 Baths

1,678 SqFt

Status Active

MLS # 6592823

Property Type Single Family Residence

Price Type --

This incredible home is located at Trilogy Verde River, a premier 55+ and All Ages Golf Resort Community. This beautiful new home features over $145K in upgrades as well as a $10K homesite premium. With an estimated completion date in August 2023, you won't have to wait long to move right into this brand new home offering 2 bedrooms + den and 2 baths in 1,678 SqFt. The popular Valletta floor plan sits on a premium lot and offers a spacious great room layout with split bedrooms. The gourmet kitchen features gorgeous cabinetry with LED undercabinet lighting, Quartz countertops, and an island with a breakfast bar. A 12-foot multi-panel sliding glass door leads out from the great room to the covered patio and backyard with built-in BBQ, pergola, and water/fire features. Other features include upgraded flooring, quartz countertops throughout, laundry room cabinets, and a 2 car garage. Front and backyard landscaping included. The amenities at Verde River are World Class with Tom Lehman inspired eighteen-hole Golf course, tennis courts, pickleball courts, and bocce ball, heated lap pool and Resort style swimming pool, hot tub, Afterburn fitness center, Helen's demonstration Kitchen for cooking classes and a 7.5 acre dog park. The community center has casual poolside dining at Eddy's Diner and gourmet dining at award-winning Needle Rock Kitchen and Tap, Alvea Spa with full-service Salon and Spa amenities, Art Loft and events center. Trilogy at Verde River is adjacent to the Tonto National Forest and is situated in the middle of miles and miles of hiking and biking trails.

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2121 W Sonoran Desert Drive Unit 43 Phoenix, AZ 85085

$657,995

3 Beds

3 Baths

2,038 SqFt

Status Active

MLS # 6728548

Property Type Townhouse

Price Type --

This beautiful home was perfectly crafted to fit your lifestyle. The open-concept kitchen flows effortlessly into the great room and dining room, making this floor plan ideal for entertaining. Additional features in this home include quartz countertops, stainless steel appliances and upgraded flooring. Contemporary neutral paint colors throughout makes this home ready for you to add your personal touches.

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18825 W Solano Drive Litchfield Park, AZ 85340

$657,900

5 Beds

3 Baths

2,925 SqFt

Status Active

MLS # 6782013

Property Type Single Family Residence

Price Type --

THIS LIKE-NEW 2022 BUILT HOME SHOWS LIKE A MODEL HOME! Contemporary features & upgrades rarely found: NEW Pebbletech pool, Lush green front & backyard landscaping & paver patio, porch, sidewalk, steps & pad($90,000), Sleek front door w/glass, Modern ceiling fans & lighting, 3-tone paint & tall baseboard, Modish feature walls includes vertical fireplace with heat. Builder upgrades include Farmhouse/stone elevation, Gourmet kitchen w/high-end wall ovens & separate gas cooktop/canopy hood + 42'' shaker cabinets with crown molding + Kashmire granite + subway backsplash + satin nickel finishes, Wood-look tile & upgraded carpet, Double slider & oversized patio, Deco stair rail, 10 ft ceilings + 8 ft doors t/o, Soaking tub & shower tile with herringbone inlay. MORE...some warranties still exist Highly desirable floorplan: 5 Bedrooms and 3 Full Baths including a Bedroom and Bath downstairs, PLUS Loft. Huge Greatroom wide open to Kitchen and 2 Dining spaces. All non-primary Bedrooms larger than average! Storage is above expectations with an oversized Walk-In Pantry and under the stairs Walk-in Closet, and extra hall cabinets, as well as Walk-in Closets in Master and spare Bedroom. Enjoy sweeping White Tank mountain views from upstairs front rooms. 3 Lush community parks/playgrounds within mere blocks of this home 9 minute walk to well-rated Canyon View High School 5 minute drive to Belen Soto Elementary School 6 miles to renowned Verrado with hiking trails, golf and popular restaurants Less than 3 miles to multiple freeways This area is very up-and-coming with new shopping, restaurants, etc being built or in the planning!

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2446 W Rowel Road Phoenix, AZ 85085

Open House

$657,060

3 Beds

3.5 Baths

2,455 SqFt

Status Active

MLS # 6785198

Property Type Single Family Residence

Price Type --

Welcome to your NEW HOME at Aster! 2,455 sq ft of living space with 3 bedrooms, 3.5 bathrooms, Loft and a 2-car garage. All three bedrooms have their own bathroom. Highly upgraded Elevated package includes a Gourmet kitchen w/ hood, GE Cafe' stainless-steel appliances, built-in gas cooktop separate wall oven, 42'' Burlap cabinets, quartz countertops, custom backsplash, a large island, upgraded 6x36'' tile and carpet. 2 car paver driveway and 2 car garage has18' wide door. Nestled within Union Park, residents can indulge in amenities including a pool, 5800 sq ft clubhouse, Pickleball courts, playgrounds, basketball courts and 12 Parks. Central Location to nearby shopping, dining and entertainment. Access to 3 different freeways within 10 minutes and be at the airport in under 30 minutes.

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5790 S Moson Road Hereford, AZ 85615

$657,000

3 Beds

2.5 Baths

2,436 SqFt

Status Active

MLS # 6782556

Property Type Single Family Residence

Price Type --

WOW!!!! This house is AMAZING!!! What an opportunity to own a custom Sante Fe Home built out of Rammed Earth on 4 Acres fully fenced and cross fenced for your horses/animals, your own PRIVATE WELL, site built pole barn with electric, huge outdoor kitchen with hickory cabinets and granite, 10-12 foot ceilings, pellet stove, bar, colored concrete floors, granite throughout, tankless water heater, 20 solar panels that are owned, huge covered patio with beautiful views of the Huachuca Mountains and the Mule Mountains from the front courtyard, pergola with custom Kiva fireplace, coyote proof chicken coop, garden/raised beds, fire safe property, horse corrals, wash rack, round pen and so much more!! ASK YOUR REALTOR FOR ''SELLER FEATURE SHEET'' and that will show you everything and more!!

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4920 E Helena Drive Scottsdale, AZ 85254

$656,990

3 Beds

2.5 Baths

1,958 SqFt

Status Active

MLS # 6769923

Property Type Townhouse

Price Type --

Location, location, location! Welcome to our brand-new community in Arizona's desirable zip code. Arabella is conveniently located near Loop 101, Scottsdale Quarter, Kierland Commons, Desert Ridge Marketplace, and Paradise Valley's shopping and dining! Our popular ''Little Rock'' floor plan features 3 bedrooms, 2.5 bathrooms, a loft, a 2-car garage, and a private yard. Designer finishes include white cabinetry with hardware, quartz kitchen countertops, two-tone paint, wood-like tile, and plush carpeting in the bedrooms. This beautiful home will also include smudge-proof stainless steel appliances, blinds, pre-plumbing for soft water, and smart home technology. Estimated completion is fall 2024. Photos of model home, finishes will vary.

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5829 E Ringtail Way Phoenix, AZ 85054

Open House

$655,990

3 Beds

2.5 Baths

1,962 SqFt

Status Active

MLS # 6785142

Property Type Townhouse

Price Type --

Dream Home Alert in Desert Ridge! Looking for the perfect place to make home? This brand-new beauty in Talinn at Desert Ridge is ready for you to move in! With 1,962 square feet of modern elegance, this home features 3 spacious bedrooms, 2.5 bathrooms, and a versatile loft—ideal for a home office, playroom, or relaxing retreat. Step into a sleek, contemporary kitchen with white cabinets, stunning quartz countertops, and stylish wood-like tile flooring that flows throughout the home. Located just moments from Desert Ridge Marketplace and High Street, you'll enjoy unbeatable shopping, dining, and entertainment options. Plus, with easy access to the 101 freeway, commuting has never been easier. This gem won't last long, make it yours before it's gone!

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10918 E Texas Avenue Mesa, AZ 85212

$655,950

5 Beds

3 Baths

2,961 SqFt

Status Active

MLS # 6762831

Property Type Single Family Residence

Price Type --

MLS#6762831 February Completion! The Wedgewood offers plenty of square footage and is stylish inside and out. Wedgewood's expansive open-concept common area holds a gathering room, kitchen with island and step-in pantry, and a casual dining. A study room is perfect for working from home. At the front of the home is a bedroom and full bathroom - perfect for your overnight guests. Upstairs, the owner's suite features dual sinks, shower and a huge walk-in closet. Three secondary bedrooms with walk-in closets share a full bath, and a spacious loft rounds out this beautiful home. Structural options include: study in lieu of dining, soft water loop, garden tub with separate shower in primary, paver front porch, and garage service door.

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4940 W La Puenta Avenue Laveen, AZ 85339

$655,261

4 Beds

3 Baths

2,683 SqFt

Status Active

MLS # 6772025

Property Type Single Family Residence

Price Type --

New home with an RV garage on a large lot! Amazing home with 4 bedrooms, 3 full bathrooms, an upstairs loft and a guest suite on the 1st level. Enjoy your Chef's kitchen with gourmet appliances, double ovens, gas cooktop, oversized island and beautiful linen cabinets & quartz counters. Kitchen opens to a large great room and dining area. Enter the large back yard thru your 12' slider that allows for endless entertaining. All wood plank tile on the lower level except in the guest suite. Owner's suite, and guest rooms are upstairs along with a loft. All bedrooms have walk in closets and lots of storage. Enjoy mountain views all around this lovely home. This home is complete. Make it yours. Seller is offering closing cost / interest rate buydowns. Photos are of a model home.

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6920 N 79th Place Scottsdale, AZ 85250

$655,000

2 Beds

2 Baths

1,432 SqFt

Status Active

MLS # 6781215

Property Type Townhouse

Price Type --

Are you hunting for a lovely townhouse that perfectly blends comfort & convenience? Look no further! This end-unit gem in the desirable Camelview Greens is the one. It offers a 2-car garage & a gated courtyard. The captivating interior highlights a well-sized living/dining room adorned with track lighting, plantation shutters, stylish tile flooring, a warm fireplace, & soaring vaulted ceilings with wooden panels, adding a touch of rustic design. Chef's kitchen is equipped with granite counters, rich wood cabinetry, a breakfast nook, and French doors to the back patio. Main retreat has wood flooring, a sitting area with patio access, a full ensuite with dual sinks, & a walk-in closet. Continue onto the private back patio with a desert landscape & pavers, ideal for fun BBQs. Visit now!

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3161 S 183rd Drive Goodyear, AZ 85338

$655,000

3 Beds

2.5 Baths

2,390 SqFt

Status Active Under Contract

MLS # 6706885

Property Type Single Family Residence

Price Type --

Discover your dream home in the desirable Las Brisas community of Goodyear, AZ! This elegant 3-bedroom, 2.5-bathroom residence features a versatile flex room/office and an upgraded RV garage with A/C mini splits and epoxy flooring. Boasting 2,390 sqft of living space on a sprawling 12,765 sqft corner lot, this property offers breathtaking views of the Estrella Mountains. Step inside to find a beautifully upgraded gourmet kitchen, complete with 42-inch upper cabinets, quartz countertops, and top-of-the-line appliances. The open-concept layout is enhanced by upgraded flooring and warm interior colors, creating an inviting atmosphere throughout. The living area is perfect for entertaining, with a multi-slide door that opens to a spacious back patio showcasing gorgeous views. The primary suite is a private retreat, featuring a deluxe walk-in shower and ample space. Enjoy added security and style with a main entrance security door and pavers. The upgraded ceiling fans throughout the home add to the comfort and elegance. Outside, the huge backyard is a blank canvas ready for your personal touchideal for family gatherings, outdoor cooking, or additional landscaping. The RV gates provide easy access and convenience for your recreational vehicles. Don't miss the opportunity to own this exceptional home with stunning mountain views and endless potential. Schedule a showing today and experience the luxury and charm of Las Brisas living!

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