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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21276 W Sycamore Drive Buckeye, AZ 85396

$650,000

4 Beds

2.5 Baths

3,039 SqFt

Status Active

MLS # 6765959

Property Type Single Family Residence

Price Type --

Prepare to be captivated by this gorgeous single-level home in Verrado Community! The façade offers a 3-car garage w/attached cabinets, paver driveway, & a gated courtyard. Impressive interior includes a large living room, formal dining room & a perfectly flowing great room adorned w/surround sound. Well-appointed kitchen is equipped w/recessed & pendant lighting, ample cabinetry w/crown molding, built-in appliances, a pantry, granite counters, a prep island w/a breakfast bar & a mosaic tile backsplash. Exterior paint updated in 2023. Make the open den a game area/study. Owner's retreat provides an ensuite w/two vanities, Kitchen cabinets with slide outs. Spacious backyard w/a covered patio, pergola and artificial turf. HVAC less than a year. Paid solar System. This is a Gem!

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19118 E Apricot Lane Queen Creek, AZ 85142

$650,000

3 Beds

2 Baths

1,950 SqFt

Status Active

MLS # 6769026

Property Type Single Family Residence

Price Type --

Welcome to Legado, a premiere community at the heart of Queen Creek. Situated on a private, low maintenance backyard with no neighbors behind. The 3 bedrooms plus den make this pristine, single level home the PERFECT comfort haven. Graciously appointed with wood plank tile flooring, plantation shutters, smudge proof appliances, granite counters, backsplash & gas cooktop. Whole house water filtration, WiFi thermostat. 3 car garage with custom garage storage. A covered patio overlooks a grass backyard with paver seating area & fire pit. Legado features playgrounds, a lighted basketball court, lighted corn hole, splash pad, & more. Convenient to Mansel Carter Oasis Park, QC Marketplace & QC District featuring shopping, entertainment & a choice of 30+ restaurants. Welcome Home!

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2700 N Horseshoe Street Unit 69 Flagstaff, AZ 86004

$650,000

2 Beds

2 Baths

1,557 SqFt

Status Active

MLS # 6772735

Property Type Townhouse

Price Type --

Discover the perfect AIR CONDITIONED home in the exclusive Saddleback Lodge at Continental Country Club! This fully furnished, SINGLE-LEVEL townhome invites you to unwind on a private deck with breathtaking golf course views surrounded by the serenity of mature trees and lush landscaping. Includes a 1-car garage, fireplace, stainless appliances appliances, and proximal to the clubhouse, restaurant, pools and resort amenities such as pickleball & fitness center. Whether for a weekend getaway or a long-term escape, this beautifully remodeled home offers unmatched comfort & convenience - an investment you will return to again and again! 2nd Bedroom currently being utilized as a den/office.

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41806 N Shadow Creek Way Anthem, AZ 85086

$650,000

3 Beds

3 Baths

2,432 SqFt

Status Active Under Contract

MLS # 6759521

Property Type Single Family Residence

Price Type --

Mountain and City Lights VIEWS along with Dramatic Sunset VIEWS! This house has SOLAR panels which helps eliminate electric bills!!! CASITA with full bath and it's own HVAC unit. 2.5 car garage so you can have a spot for 2 cars and your golf cart! Courtyard with gate. Wood blinds. Custom closets. Upgraded appliance package. Gas indoor fireplace and exterior gas firepit. Washer and dryer convey. Maple cabinets. Upgraded lighting. built in BBQ in backyard. Security system. Thermal break/low E windows, water softener, and reverse osmosis. Motorized sun shades. Hot tub conveys. Beautifully upgraded backyard and courtyard. HVAC is newly updated. Rain gutters. Will feel like you're going home when you walk inside. Another turnkey opportunity in Anthem Country Club for the most discerning Buyer! This home will blow your socks off! Country Club Lifestyle with Resort Style Amenities...Anthem Country Club is managed by Club Corp which offers many great benefits to members that reciprocate around the world! Two 18 hole golf courses, Persimmons and Ironwood, designed by Greg Nash. 2 Pro shops, 2 sets of men's and women's lounges / locker rooms, 2 member restaurants, 2 gyms, 2 pools, 2 spas, several tennis courts, Gorgeous Ball Room for ongoing Member events and private events venues available as well, 2 Impressive guard gated entrances, all surrounded by breathtaking mountain and golf course views...you will love being a member of the Anthem Golf & Country Club!

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2813 E Indian Wells Place Chandler, AZ 85249

$650,000

4 Beds

3 Baths

2,566 SqFt

Status Active

MLS # 6776954

Property Type Single Family Residence

Price Type --

Unmatched Value! So many extras you'll have to inquire to get the full list..... Discover your dream 2-story home in the highly desirable Cooper Commons community in Chandler! Set on a prime corner lot, this impressive residence offers 4 spacious bedrooms, 3 stylish bathrooms, and a roomy loft—perfect for all your family's needs. With a main-level bedroom and full bath, it's ideal for guests or multi-generational living. Enjoy modern upgrades like Nest Thermostats, a Vivint security system with cameras, air dryers in the bathrooms, and a water softener—all designed for comfort and convenience. Don't miss out on this exceptional home! entertaining, a heated pool for year-round enjoyment, and lush artificial turf for easy maintenance and play. This home is designed to impress and is sure to exceed your expectations. Don't miss out on this incredible opportunity to make it yours today!

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4500 N Paseo De Los Rancheros -- Tucson, AZ 85745

$650,000

4 Beds

2 Baths

2,312 SqFt

Status Active

MLS # 6777821

Property Type Single Family Residence

Price Type --

A beautiful 4 bed, 2 bath residence in Rancho Del Cerro is now for sale! Nestled on a premium corner lot and featuring a low-care landscape, 2 car garage, well-laid pavers, and a welcoming front porch, this is sure to be the home you've been looking for! Inside you will find large dining & living areas w/vaulted ceilings and custom palette throughout. Enjoy quality time w/friends & loved ones in the cozy family room, showcasing exposed beams, elegant wood-look flooring, and a beehive fireplace. The eat-in kitchen offers ample cabinetry w/crown moulding, pendant & recessed lighting, and built-in appliances for all your cooking needs. The primary bedroom boasts soft carpet, private outdoor access, a walk-in closet, and a full ensuite w/dual sinks & a jetted tub. Lastly, the wonderful backyard includes a covered patio, extended seating areas, two lovely pergolas plus a gazebo, artificial turf, a refreshing hot tub, and a sparkling blue pool! What are you waiting for? Act now!

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16042 W Shaw Butte Drive Surprise, AZ 85379

$650,000

4 Beds

3.5 Baths

2,827 SqFt

Status Active

MLS # 6777953

Property Type Single Family Residence

Price Type --

Discover modern farmhouse charm in this 2019 Greer Ranch home. This single-level, ranch-style residence showcases refined upgrades, from quartz countertops and tall cabinetry to custom plantation shutters and wood-look tile. The spacious layout includes 4 bedrooms, 3.5 baths, and a versatile bonus room with barn doors, ideal for a home office. Thoughtfully designed, the en suite bedroom offers privacy for guests or extended family. Enjoy an Arizona room, lush turf landscaping, and a welcoming front porch. Situated next to a playground, you'll enjoy extra space and serenity. Three-car garage included.

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9068 N Cox Road Casa Grande, AZ 85194

$650,000

3 Beds

2 Baths

1,600 SqFt

Status Active

MLS # 6782730

Property Type Single Family Residence

Price Type --

Take a look as this incredible home on 5 acres in Casa Grande's foothills, and it includes a shop to make any hobbyist or craftsperson smile. Offering 3 bedrooms, 2 bathrooms, and an oversized garage that gives you the room you need for any vehicle you own. The main bedroom has a walk-in closet, as well as a walk-in closet off of the second bedroom. Which also boasts beautiful mountain views. The third bedroom has an exceptionally large walk-in vault and is split from the other 2 bedrooms. The kitchen, living room, and dining area flow together seamlessly, and the laundry room has its own sink and cabinet. The oversized garage also has a separate entry. Leading to the 2400 sq ft shop with 3 rollup doors, and 17 quadruple elec. outlets. both home and shop are nicely insulated. Rare find!

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1581 E Del Rio Street Chandler, AZ 85225

$650,000

4 Beds

3 Baths

2,321 SqFt

Status Active Under Contract

MLS # 6694922

Property Type Single Family Residence

Price Type --

Hidden gem nestled in a quiet neighborhood of Superstition Ranch. This gorgeous home features high flat ceiling which instantly makes this home feel more spacious and luxurious. Great layout with 4 bedrooms and 3 full baths, split floorplan with separated master suite . Skylight in formal dinning , spacious kitchen with wine cooler. Home has hard wood, carpet and tile flooring. Backyard oasis is perfect for cooling down in summer time by jumping into the pool or relax in the heated spa. New roof underlayment installed in January. Fresh painted interior and exterior. Home comes with Tesla charging station, makes life easier. Excellent schools BASIS and Legacy Traditional school (North Chandler) both just about 1 mile away. Don't miss this opportunity to own this great home!

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12345 W Encanto Boulevard Avondale, AZ 85392

$650,000

5 Beds

3 Baths

3,751 SqFt

Status Active Under Contract

MLS # 6704628

Property Type Single Family Residence

Price Type --

Exquisite 2-story home with a $10,000 seller concession for buyer expenses! All on approx. ¼ of an acre. Stunning 5 spacious bedrooms, 3 luxurious bathrooms, providing ample space! As you enter, you'll be greeted by magnificent wrought iron security doors and double entry front doors, and soaring ceilings. Spacious bedroom downstairs with a full bath adjacent. Gourmet Kitchen with large island, SS refrigerator, granite countertops make it complete. Formal dining and living room with a fireplace provide an elegant and intimate setting. This home offers an amazing loft for additional living space, a built-in desk for a home office, a beautiful balcony overlooking the pool. Spacious backyard with a covered patio, a cabana, a fire pit, a separate storage.

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7500 E Deer Valley Road Unit 87 Scottsdale, AZ 85255

$650,000

4 Beds

2.5 Baths

2,371 SqFt

Status Active Under Contract

MLS # 6727580

Property Type Single Family Residence

Price Type --

LONG LIVE SUMMERTIME. This is the perfect setting for the moments that last a lifetime. Need space? This move-in ready home in the popular Arizona Silverado subdivision is the answer. This stunning home welcomes with comfortable, smartly-designed spaces. The kitchen has all the upgrades you want: granite counters, stainless steel appliances, breakfast bar and pantry. You'll love the easy-care engineered wood flooring throughout. The large primary suite has lots of natural light, a walk-in closet and the bathroom has a separate walk-in shower. Everyone loves a loft and this one is quite spacious. If you promised yourself the best in life, you can keep that promise. Move-in ready for a summer full of fun, Arizona-style! Nearby you will find a fun neighborhood park with world-class shopping, dining and medical facilities. Every kind of recreation imaginable awaits. Convenient access to the Loop 101 freeway, you're just minutes from Salt River Fields, Talking Stick Resort, Scottsdale Fashion Square Mall and Sky Harbor Airport. It is impossible to be bored when you live in the Valley of the Sun. This area offers scenic beauty, miles of natural parkland, picturesque lakes, and a wide variety of activities, events, and attractions for every interest. Surrounding cities and metropolitan areas offer a unique mix of culture, shopping, sports stadiums, concert arenas, and attractions ranging from the cosmopolitan to the Southwestern.

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4719 E Rockledge Road Phoenix, AZ 85044

$650,000

4 Beds

2.5 Baths

2,342 SqFt

Status Active Under Contract

MLS # 6727468

Property Type Single Family Residence

Price Type --

Come and see this gorgeous 4 Bedroom 2.5 Bathroom Home with Sparkling Pool and 3 Car Garage located in the popular Desert Breeze neighborhood in the heart of Ahwatukee! The home has been nicely appointed with designer finishes and paint schemes. Recent updates and upgrades include a complete master bathroom remodel in 2023 including a new soaker tub, custom vanity w/ soft close drawers and quartz countertops, new shower with frameless glass enclosure. New AC in 2022, new pool pump and artificial turf in backyard in 2024, all new stainless steel appliances as well as new washer and dryer in 2022 and new water heater in 2021! The home boasts a true pride of ownership through and through! Located in close proximity to excellent shopping, restaurants, and entertainment,. Easy access to numerous freeways and is just a short drive to Sky Harbor Airport and numerous employment corridors. Located in the highly rated Kyrene School District and NO HOA!

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