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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42158 N Golden Trail San Tan Valley, AZ 85140

Open House

$669,990

4 Beds

3 Baths

2,513 SqFt

Status Active

MLS # 6733569

Property Type Single Family Residence

Price Type --

***Home for the Holidays!!!!*** Estimated completion November 2024!! - Welcome to Edgewood Estates, where luxury meets practicality! Step through the expansive foyer into a spacious great room, boasting a stunning wall of windows, perfect for entertaining guests or enjoying family time. The kitchen is a chef's dream with beautiful cabinets, a spacious island for meal prep or casual dining, and high-end finishes throughout. Retreat to the private primary suite featuring a relaxing primary bath and a generously sized walk-in closet. This home also features an Extra Suite Plus, ideal for multi-generational living or hosting guests with privacy and comfort. ^Homes have been significantly discounted and have the option of short/long term interest rate buydowns when choosing our preferred Lender. Additional eligibility and limited time restrictions apply.

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14927 N 55th Drive Glendale, AZ 85306

$669,980

5 Beds

3.5 Baths

3,053 SqFt

Status Active

MLS # 6755286

Property Type Single Family Residence

Price Type --

LEED Certified Gold Home. 5 Bedroom all with walk in closets. 3.5 Bath, Huge loft. 2 car Garage. Benton Birch Burlap Cabinets. New Caledonia granite kitchen countertops. Kitchen 42'' uppers. GE gas range, SS appliances. Tile flooring is 6'' X 36'' wood looking tile

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4208 E Oak Street Phoenix, AZ 85008

$669,900

3 Beds

2 Baths

1,781 SqFt

Status Active

MLS # 6778096

Property Type Single Family Residence

Price Type --

Seize the opportunity to live in the coveted Arcadia neighborhood, nestled close to premier shopping, dining, and entertainment. This exquisitely updated home sits on just over a quarter-acre and features three bedrooms and two bathrooms across 1781 square feet with an expansive great room design and additional sunroom. The kitchen boasts pristine white cabinets, Quartz and butcher block counters, a remarkable Frigidaire gas stove with pot filler, custom tile backsplash, and a central island with a breakfast bar. The main bedroom is equipped with an ample walk-in closet, a stylish accent wall, and a sliding barn door that opens to an en suite bathroom with a dual-sink vanity and a tiled shower featuring a rain showerhead and glass enclosure. An enclosed patio adds a versatile living area ideal for a home office or fitness space. The vast backyard offers abundant grassy areas for children and pets, mature trees for shade, a large patio for gatherings, a covered shuffleboard court, an RV gate with a concrete slab for extra parking, all surrounded by a block fence for privacy. The above ground spa is not included, but is negotiable. Additional features include a single-car garage with extra carport space, a charming entrance with exterior shutters and a Dutch front door, an electric fireplace in the great room, custom window treatments, recessed lighting, luxury vinyl plank flooring in the common areas, an inside laundry room, and much more. Washer and dryer are negotiable.

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8045 N 14th Street Phoenix, AZ 85020

$669,900

3 Beds

2 Baths

1,758 SqFt

Status Active

MLS # 6745672

Property Type Single Family Residence

Price Type --

**Attention** Investment opportunity in North Central Phoenix! This property includes a 1758 Sf Main Home and 900 SF Remodeled Casita. Both units are leased, generating $4,320/lease monthly. NO HOA. 15,027 Sf lot with plenty of room for future expansion. The main home includes a spacious kitchen, living/family room, large, covered patio with a large backyard and RV gate. The 2-bed, 1-bath Casita includes New white shaker cabinets, stainless-steel appliances and LVP flooring. Conveniently Located near the Phoenix Mountain Preserve with quick access to hiking trails, Great Local dining, shopping, and the 51 Freeway. Quick access to anywhere in the valley, 10 minutes to Downtown Phoenix. If you're looking for an investment opportunity, check this out today to see the potential for yourself

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18733 N Avila Drive Surprise, AZ 85387

$669,900

2 Beds

2.5 Baths

2,539 SqFt

Status Active

MLS # 6773537

Property Type Single Family Residence

Price Type --

Beautiful updated Ashbury home in one of the quietest areas in The Grand. Great open floor plan with large kitchen, dining, and living area. Kitchen has island with lots of storage, new counter, updated cabinets and all new stainless steel appliances. The living area boasts a beautiful Stonecreek media wall with fireplace and lighted shelves. The large primary bedroom includes a walk-in closet, beautifully remodeled en suite bathroom with walk in shower and free standing bathtub. Guest bedroom includes an updated en suite bathroom. Den includes a Murphy bed and can double as an office or extra guestroom. New floors and plantation shutters throughout and large windows provide lots of natural light and enhance the beauty of this home. Laundry room has new cabinets, new washer/dryer, sink and clothes bar. New paint throughout the interior and exterior. Triple garage with new storage cabinets. A private covered patio completes the beauty of this home!

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14018 S 44th Street Phoenix, AZ 85044

$669,900

4 Beds

2 Baths

2,155 SqFt

Status Active Under Contract

MLS # 6774060

Property Type Single Family Residence

Price Type --

Don't miss this MUST-SEE opportunity! Entertain in your picturesque backyard with an updated Heated Saltwater Pool and Spa with Private Mountain Preserve Views! This home has it ALL! NEW ROOF, NEW OWNED SOLAR, and newer patio doors and windows on the West side make this an extremely energy efficient home! Updated luxury vinyl plank flooring throughout, plantation shutters, and an open floorplan are an entertainer's dream! Move-In Ready! Exterior painted in 2024, hot water heater in 2023. You do not want to miss this opportunity as this house will go quickly! Great location, close to highways, shopping, restaurants, trails, and parks!

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3059 E Rose Lane Phoenix, AZ 85016

$669,900

2 Beds

2 Baths

1,185 SqFt

Status Active

MLS # 6741677

Property Type Townhouse

Price Type --

Welcome to this charming golf course bungalow! Turnkey and ready for you to move-in! This 2 bed, 2 bath townhouse is located in the Biltmore Courts and overlooks the 11th tee box on the Arizona Biltmore Links Golf Course! The home has been recently renovated. New paint, new kitchen appliances, new cabinets, new quartz countertops, new bathroom tile, new carpet and new light fixtures! The property was also meticulously maintained by previous owners who only utilized it seasonally. Through every window in the home you have mountain views of Camelback, Phoenix Mountain Preserve and Piestewa Peak! Enjoy your evenings on the peaceful patio watching golfer tee off, an infamous arizona sunsets over the course as well as the downtown lights once the sun goes down. It's truly an oasis! You'll also get to enjoy the tennis/pickleball courts, heated pool, exercise room and Clubhouse, just steps away from your front balcony.

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4444 E Jesse Street Gilbert, AZ 85295

$669,900

4 Beds

3 Baths

2,420 SqFt

Status Active

MLS # 6731266

Property Type Single Family Residence

Price Type --

Fabulous 4 bedroom/3 bath floorplan located in the highly sought after community of Cooley Station. The open floorplan boasts 10 foot ceilings with the primary en suite, 2 bedrooms, a full bathroom, and large laundry room with built in cabinets on the first floor. The gourmet kitchen includes a farmhouse sink, LED dimmable lighting under kitchen cabinets, subway tile surround on kitchen Island, upgraded kitchen cabinets with crown molding, and ceramic subway tile back splash. A nice size loft, sitting area, bedroom, and full bath are located upstairs- perfect for guests! Exit out to the beautifully landscaped yard from the kitchen to a large covered patio and artificial turf. The community offers 2 pools and 4 large parks; 1 just footsteps from the front door. Complete front landscape and back alley landscape fully maintained by the HOA. This home is designed with functionality and style in mind, catering to both practical needs and aesthetic preference. The combination of modern amenities and thoughtful details suggests a well-appointed and comfortable living space. Don't miss this wonderful opportunity to live in Cooley Station!

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3629 W Amerigo Court Anthem, AZ 85086

$669,900

5 Beds

3 Baths

3,389 SqFt

Status Active

MLS # 6760593

Property Type Single Family Residence

Price Type --

COVETED UPGRADED GEM IN PRIME LOCATION WITH POOL!!! Featuring a flowing floor plan w/ wide open kitchen boasting quartz counters, upgraded cabinetry, stainless and black appliance ensemble & walk-in pantry, upgraded flooring throughout, full bedroom/ bath (w/ shower) downstairs, amazing speak easy bar area as you enter the home, huge primary suite w/ impressive spa-like bath boasting double sinks, separate glass enclosed shower/ soaking tub & massive closet, low maintenance backyard w/ incredible oversized pool with waterfall, extended pool decking & room for additional touches. Ideally located in award winning Anthem community w/ awesome parks, schools, shopping, dining & entertainment options nearby! COME CHECK IT OUT TODAY!!!

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6501 W Crocus Drive Glendale, AZ 85306

$669,900

4 Beds

3 Baths

2,561 SqFt

Status Active

MLS # 6772871

Property Type Single Family Residence

Price Type --

Take advantage of this charming tri-level home with no HOA! This beauty displays brick accents, a verdant front yard, a 3-car garage, and a courtyard. Be welcomed by an inviting living room adorned with vaulted ceilings, plantation shutters, and a trending palette complemented by beautiful wood-look tile flooring. Continue onto the lower level and find formal dining and sizable family rooms featuring a brick-wall fireplace, great for cold evenings. Kitchen is fully equipped with granite counters, white cabinetry, a tile backsplash, recessed lighting, a pantry, and a breakfast nook. Upstairs, the main retreat has plush carpeting, a pristine ensuite with dual sinks, and a walk-in closet. Out the back, you have a covered patio & a refreshing pool ready to enjoy. Don't miss out!

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70 W Roadrunner Drive Chandler, AZ 85286

$669,900

4 Beds

2.5 Baths

2,750 SqFt

Status Active Under Contract

MLS # 6675936

Property Type Single Family Residence

Price Type --

ASSUMABLE LOAN AT 2.75%!! -- Open to Veterans, Non-Veterans AND INVESTORS! Don't miss this recently remodeled home in Chandler. Oversized kitchen was recently updated and all new flooring throughout the home. Features 4 bedrooms and an office, an oversized loft, 2.5 baths with a 1 car garage separate from the 2 car garage. All appliances are included. Step into the back yard with the large covered patio, diving pool and spa.

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13324 W Crown Ridge Drive Sun City West, AZ 85375

$669,900

2 Beds

2 Baths

2,254 SqFt

Status Active Under Contract

MLS # 6766407

Property Type Single Family Residence

Price Type --

This beautifully designed 2-bedroom, 2.5-bathroom home offers 2,254 square feet of luxurious living space in a quiet and highly sought-after neighborhood. With an abundance of custom features, this home is the perfect retreat for relaxation and entertainment. The main living areas feature vaulted ceilings, custom lighting, and an inviting ambiance, perfect for hosting or relaxing. The spacious master bedroom features a private fireplace, and gorgeous pool views. The spa-like en-suite bathroom includes a 2-person Kohler Vibracoustic tub and walk-in shower. Versatile bonus room can be used as a home office, craft room, or studio. The chef's kitchen is equipped with high-end stainless steel appliances, Scottsman ice maker, granite countertops, and a large island, making it ideal for prepari preparing meals and entertaining. Dive into your own private HEATED saltwater pool, perfect for year-round enjoyment. The backyard is an entertainer's dream with a mini-golf course featuring three different styles of holes, shuffleboard court, and a covered patio with a built-in outdoor bar. OWNED solar panels significantly reduce energy costs significantly.

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