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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8622 E Cambridge Avenue Scottsdale, AZ 85257

$650,000

3 Beds

2 Baths

1,290 SqFt

Status Active

MLS # 6785553

Property Type Single Family Residence

Price Type --

Beautiful Old Town Scottsdale Home. New Exterior and Interior Paint, baseboards, and carpet. Close to freeway to get anywhere easily in the valley.

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2600 E Summer Loop Forest Lakes, AZ 85931

$650,000

2 Beds

1.5 Baths

1,725 SqFt

Status Active

MLS # 6778410

Property Type Single Family Residence

Price Type --

Nestled atop the majestic Mogollon Rim, this exquisite A-frame cabin in Forest Lakes Estates beckons those seeking an escape from the quotidian.This gem will be coming soon to the market and is a mere two-hour scenic drive from Phoenix, offers a tranquil retreat where temperatures graciously dip 30-50 degrees below the valley's swelter. The property's 1,726 square feet of tastefully updated living space unfolds like a carefully curated narrative. Expansive picture windows frame nature's ever-changing landscape, while the eat-in kitchen features stylish upgraded granite counters and endless pantry/storage options. The main floor houses two spacious bedrooms and a bathroom, while the upper level reveals a sleeping loft complete with a playful nook and generous storage. Outside, the grounds are a testament to thoughtful landscaping. Verdant grass intermingles with ferns, while carefully cultivated bulbs and lilacs perfume the air. Majestic lilies stand sentinel along the home's façade, their regal presence complemented by nature's own sculpture garden of boulders. Entertainment options abound with dual fire pits, a pergola, and a whimsical tree fort. The extra depth two-car garage conceals a surprise - a game room/bunkhouse, perfect for hosting soirées or accommodating overflow guests. The garage also has laundry area and could also be converted a tandem 4 car garage. Storage Shed conveys too for additional storage. Seller has done updates from, flooring to lighting and done all the important updates: electrical, plumbing (PEX), and added forced air heating system. Forest Lakes, an idyllic community free from HOA constraints, boasts several trout-stocked lakes and a vibrant, welcoming atmosphere. The voluntary FLOA fosters a sense of camaraderie through community events and a shared gathering space. This exceptional property, priced at market value, promises not just a home, but a legacy of cherished memories amidst the towering Ponderosa pines. Seize this opportunity to elevate your lifestyle and immerse yourself in the lap of nature's luxury.

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13812 W Parada Drive Sun City West, AZ 85375

$650,000

3 Beds

3 Baths

2,543 SqFt

Status Active Under Contract

MLS # 6749644

Property Type Single Family Residence

Price Type --

Must see this spacious, upgraded property on the 11th hole of Deer Valley Country Club! This light-filled home is updated with new flooring, tall baseboards, water softener, new water heater, solar tubes, plantation shutters, and the roof underlayment! The grand double door entryway leads to a formal living/dining space with SPECTACULAR view. Eat-in kitchen updates include NEW cabinets, granite & appliances. Both downstairs baths have new cabinets & beautiful showers! A huge primary suite upstairs has a walk-in closet & spectacular bathroom. Two bedrooms plus den are on the first floor, as well as a laundry room w/ storage, and lovely Arizona room to enjoy your GOLF COURSE VIEWS! Coveted 2.5 CAR GARAGE! Don't miss your chance to own the best of AZ living!

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1373 W Cindy Street Chandler, AZ 85224

$650,000

4 Beds

2.5 Baths

2,018 SqFt

Status Active Under Contract

MLS # 6775478

Property Type Single Family Residence

Price Type --

Welcome to your dream home—this completely upgraded oasis is designed for comfort, style, and elevated living. The open-concept layout flows effortlessly, perfect for both entertaining and relaxing. The kitchen, a chef's dream, features high-end appliances, custom cabinetry, and a view of the expansive backyard. The outdoor space is an entertainer's paradise with a sparkling pool, extended travertine decking, a putting green, and extended artificial turf for low-maintenance enjoyment. Unwind in the downstairs master suite, while upstairs offers three bedrooms and a versatile loft. The garage has been transformed into the ultimate man cave, ideal for hobbies or relaxation. This home offers the perfect blend of luxury, convenience, and a lifestyle built for creating lasting memories!

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12698 E Pivot Peak -- Gold Canyon, AZ 85118

$650,000

4 Beds

3 Baths

1,961 SqFt

Status Active Under Contract

MLS # 6776706

Property Type Single Family Residence

Price Type --

Welcome to this beautiful 4-bedroom, 3-bathroom home, built in 2022, nestled in the serene community of Peralta Canyon, located in Gold Canyon AZ. featuring BREATHTAKING mountain views. This modern gem boasts an open floor plan with a spacious living area perfect for entertaining. The kitchen features high-end appliances and a reverse osmosis (RO) system for clean, fresh water. Step outside to your private oasis, where a heated pool and spa await, perfect for relaxing or enjoying Arizona's sunny weather during any season. The front and backyard are equipped with an efficient irrigation system, ensuring easy maintenance for your outdoor spaces. Don't miss the chance to check out this home!

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1603 N El Dorado Court Chandler, AZ 85224

$650,000

4 Beds

2 Baths

2,029 SqFt

Status Active Under Contract

MLS # 6778551

Property Type Single Family Residence

Price Type --

Discover the endless possibilities with this beautifully upgraded Chandler gem, tucked away in a private cul-de-sac on a nearly 16,000 sq ft lot with no HOA. You'll find ample space to create the lifestyle of your dreams—imagine building a guest house, designing a gorgeous garden beyond the charming white picket fence in the backyard, and enjoying the ultimate outdoor oasis. This meticulously maintained home offers modern amenities and thoughtful touches, including OWNED solar panels, a freshly painted exterior, and energy-efficient upgrades. Step into a fully updated kitchen (2022) featuring elegant shaker cabinets, granite countertops, a stainless steel sink, and high-end LG and Samsung appliances. Cont... The entire house boasts wood-grain ceramic tile throughout and you'll love the cozy stack stone fireplace. Enjoy year-round comfort with a new 5-ton Lennox A/C unit, new ductwork (2024), and a recently installed insulated garage door with quiet rollers. Outside, a newly resurfaced Pebble Sheen pool (2023), custom RV gate, extended driveway, and full RV hookups make this home perfect for adventurers. The front yard's fresh landscaping, complete with artificial grass and paver steps, adds the perfect curb appeal. This move-in-ready home offers a rare blend of privacy, convenience, and potential in a highly desirable location. Check the documents tab for a complete list of the extensive upgrades. The possibilities here are truly endless!

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41448 N Bent Creek Way Phoenix, AZ 85086

$650,000

4 Beds

2 Baths

2,082 SqFt

Status Active

MLS # 6771488

Property Type Single Family Residence

Price Type --

Beautifully updated home, remodeled in 2022 with new flooring, fresh paint, and a modern kitchen featuring an expanded waterfall island, new appliances, and upgraded lighting. This home includes 3 bedrooms, plus a versatile 4th bedroom/office with a closet. Enjoy energy efficiency with owned solar panels, a newer HVAC system, tankless water heater, and water softener. The backyard is a private oasis with a hot tub, gas fire pit, misters and offers a beautiful view of Daisy Mountain. Smart home features include a Nest doorbell, voice activated outdoor misters and fans, Yale lock, and programmable thermostat. Perfectly located, just a short walk to Ironwood Clubhouse and half a mile from Daisy Mountain trailhead.

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5760 W Harrison Street Chandler, AZ 85226

$650,000

2 Beds

2.5 Baths

2,318 SqFt

Status Active

MLS # 6782219

Property Type Single Family Residence

Price Type --

Welcome to Mays Pond, where this fantastic two-story home awaits you! Nestled on a corner lot, it displays veneer accent details, 3-car garage, & a lovely mature landscape. Fabulous interior boasts tons of natural light, designer paint, vaulted ceilings, stylish light fixtures, and tasteful flooring - wood & soft carpet. Enjoy the formal living/dining room and a separate family room with a fireplace, media niche, & French doors to the back! The impressive kitchen has SS appliances, granite counters, mosaic tile backsplash, ample cabinets, a breakfast bar, and a bay window. Seperate den downstairs with built-ins. Large main bedroom upstairs, offering an ensuite with dual sinks, soaking tub, & a sizable walk-in closet. Outback, you have fruit trees & a paver-covered patio to relax. Just WOW This was a builders home! 3rd bedroom was converted into an amazing walk in closet.

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6364 E Star Valley Circle Mesa, AZ 85215

$650,000

3 Beds

2.5 Baths

2,432 SqFt

Status Active

MLS # 6786077

Property Type Single Family Residence

Price Type --

A MUST see if you are looking for a whole lot of classy design, long range mountain views, close up golf course views, entertaining space, in and out, your going to love it! Now, priced to sell with Original Owners who maintained and improved the home continually ie.. new roof 2022, new vinyl windows with lifetime warranty, new AC 2018, and much more. Wait until you see the great location with golf course views! The back yard has every thing you need for complete enjoyment and entertaining, even a putting green. Additional goodies, super BBQ &Firepit

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13218 W Castlebar Drive Sun City West, AZ 85375

New

$650,000

3 Beds

2 Baths

2,880 SqFt

Status Active

MLS # 6783119

Property Type Single Family Residence

Price Type --

Exceptional 3 bedroom remodel on the 17th hole of the Briarwood Golf Course/CC. The $100k remodel won't disappoint. Enjoy the stylish kitchen w/ KitchenAide S/S appliances. KraftMaid cabinets and a HUGE island makes it an inviting place to gather. All 3 bedrooms have walk-in closets along with 1.75 updated bathrooms. The remodel includes luxury laminated flooring, solar glass double pane windows/screens, and sliding glass doors. Additionally, new paint thru-out, newer roof ,water main, upgraded landscaping, and outdoor patio. other bonuses are louvered shutters, 4 solar tubes, newer electric hot water heater, covered screened in patio, new garage door opener w/remotes, and updated irrigation system. Also included BFS Home Warranty through July 2025. Also enjoy desirable N/S orientation

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20389 N 54th Avenue Glendale, AZ 85308

$650,000

4 Beds

2 Baths

2,119 SqFt

Status Active

MLS # 6785779

Property Type Single Family Residence

Price Type --

Discover this beautifully maintained home in one of the valley's most sought-after lake communities. This home offers the perfect blend of convenience and style, showcasing a spacious three-car garage with plenty of storage, gorgeous wood floors, plantation shutters, and vaulted ceilings. The open-concept kitchen, with its lovely granite countertops, white cabinetry, and sleek stainless steel appliances, seamlessly flows into the family room, creating an ideal space for both entertaining and relaxing after a long day. Enjoy your outdoor living space with a covered back patio, lush green grass, and mature trees, creating a peaceful, private retreat. Ideally located near the 101, you'll enjoy easy access to everything you need. Don't miss out on the opportunity to make it yours!

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1245 N Windmill Way Chino Valley, AZ 86323

$650,000

3 Beds

2 Baths

2,304 SqFt

Status Active

MLS # 6787306

Property Type Single Family Residence

Price Type --

FABULOUS Multi-Generational HORSE SETUP on 5.22 Fully Fenced Acres with a 17 GPM Well, Outstanding VIEWS, & easy access only .7 miles off Black Top. Home features 3Bedrooms/2Bathrooms/2.5CarGarage, 16'' Travertine Tile & Carpet for flooring, Ceiling Fans, GREAT ROOM Concept on both levels, Formal Dining Room & a massive Covered Deck on Upper level creating a massive Covered Porch on Lower Level. Kitchen is well appointed with Knotty Hickory Cabinetry, Corian Countertops, Eat-In Kitchen area, Quality Appliances (inc. Fridge, Oven/Range, Micro, New Dishwasher, & Washer/Dryer in Laundry all conveying). Upper floor also has Knotty Hickory/Corian in Family Room. Primary Bedroom is spacious, has dual Sinks, Jetted Tub/Separate Shower & large Walk-in Closet. Other amenities include NEW ROOF Pipe Fenced Perimeter, Cross fenced, 3 Auto Waterers, Hay Barn, Mare Motel, Large Shade structure, Workshop area in garage, & Zoning allows just over 10 Hooved animals.

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