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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7709 W Boca Raton Road Peoria, AZ 85381

$599,000

4 Beds

2 Baths

1,642 SqFt

Status Active

MLS # 6698687

Property Type Single Family Residence

Price Type --

Welcome to your fully renovated, modern oasis! This stunning four-bedroom, two-bathroom home has been thoughtfully updated from top to bottom. Step inside to discover a light, bright, and open floor plan with all-new flooring that flows seamlessly throughout the space. The heart of the home is the gorgeously remodeled kitchen, featuring sleek cabinetry, high-end countertops, and brand-new appliances. Prepare to be amazed by the stunning limestone backsplash and the focal point of the kitchen, a breathtaking waterfall island that offers both beauty and functionality. The kitchen also boasts an eat-in area with tons of seating, making it the perfect spot for casual meals or entertaining guests. The vaulted ceilings add to the sense of space and grandeur, creating a truly luxurious feel. Both bathrooms have also been meticulously updated to provide a spa-like experience, with modern fixtures and finishes. Gather around the new fireplace in the spacious living area, perfect for cozy evenings with loved ones. Outside, a brand-new RV gate provides convenient access to the oversized corner lot, offering ample parking, including space for an RV. Enjoy the outdoors in the newly landscaped front and back yards, providing the perfect backdrop for entertaining or simply relaxing in the Arizona sun. NO HOA!!! For those interested, all the furniture is available for purchase on a separate bill of sale. Please see the list of updates in the documents tab. Don't miss the opportunity to make this beautifully renovated home your own!

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2323 N Central Avenue Unit 906 Phoenix, AZ 85004

$599,000

2 Beds

2 Baths

1,456 SqFt

Status Active

MLS # 6703380

Property Type Apartment

Price Type --

RECENT PRICE IMPROVEMENT & BEST VALUE at Regency on Central. SPECTACULAR city + mountain views! See virtual tour. Historic building designation = LOW PROPERTY TAX! Quality modern design. Huge kitchen & great room. Tall ceilings. 2 bedrm, 2 bath. Near downtown fun venues & employers (incl. health/academic Banner Hospital, St. Joseph, Barrow, Creighton, UA med school, ASU downtown). Perfect live/work. Resort lifestyle, lock & leave. Mountains, twinkling city lights, BIG sunset ambiance, sparkling pool below. Perfect entertainment/hosting. Upgraded ventilation, modern custom cabinetry & lighting/storage/closets. Spacious chef's kitchen, quartz countertops. HUGE double Electrolux ICON professional refrigerator/freezer. Built-in wine cooler, oven/microwave, mirrored bar, hooded range.

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13665 W Evans Drive Surprise, AZ 85379

$599,000

5 Beds

3.5 Baths

3,540 SqFt

Status Active

MLS # 6703301

Property Type Single Family Residence

Price Type --

This beautiful property is well maintained, with large open living areas and high ceilings. It has a large new kitchen with lots of storage, new carpet throughout, newly painted, very large garage and much more! Four bedrooms are upstairs, including master bedroom with a balcony, and a family room. The fifth bedroom is downstairs with a full bathroom. This home is great for a growing family!

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27194 N Skipping Rock Road Peoria, AZ 85383

$599,000

4 Beds

3 Baths

1,958 SqFt

Status Active

MLS # 6705368

Property Type Single Family Residence

Price Type --

Beautiful 4 bedroom 3 bath home. 3 car tandem garage with lots of storage and a 220 plug. Warm neutral color throughout. Home was just painted and new neutral carpet has been installed. Custom tile throughout in all the right places. The large kitchen with granite slab opens into a spacious family room and eat it dinning area. The backyard is an entertainers dream. Great use of space with many outdoor seating areas. There is also your own private bar, natural Gas BBQ, gas firepit, and hot tub. Great mountain views!!

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4295 Sawbuck Way Wickenburg, AZ 85390

$599,000

2 Beds

2.5 Baths

1,869 SqFt

Status Active

MLS # 6711598

Property Type Single Family Residence

Price Type --

Located in the resort-style community of Wickenburg Ranch, this exquisite home is a haven of luxury and comfort, featuring 2 spacious bedrooms and 2.5 elegant bathrooms. The 2 car garage offers ample space for vehicles and storage, complemented by a separate garage specifically designed for a golf cart. The open floor plan is ideal for modern living, highlighted by an upgraded kitchen with a large island, perfect for culinary endeavors and social gatherings. The living area is bathed in natural light, thanks to a stunning wall of sliding glass doors that open to a covered outdoor patio. This seamless indoor-outdoor transition invites you to relax and entertain while enjoying the beautifully landscaped backyard. The primary bathroom and den showcase stylish barn doors, blending rustic charm with modern elegance. This seamless indoor-outdoor transition invites you to relax and entertain while enjoying the beautifully landscaped backyard. The backyard offers an unobstructed view of the lush golf course, ensuring privacy and tranquility with no homes situated behind it. Located in Wickenburg Ranch, this home provides access to a host of amenities, making it a perfect retreat in a vibrant and active community.

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19766 W Heatherbrae Drive Litchfield Park, AZ 85340

$599,000

4 Beds

3 Baths

2,585 SqFt

Status Active

MLS # 6733049

Property Type Single Family Residence

Price Type --

Discover the charm of Verrado living in this stunning home, just a short walk from shopping and dining, and conveniently located 2 miles from the I-10 and 3 miles from the 303. This residence boasts one of the neighborhood's most popular floor plans, featuring 9+ foot ceilings for a spacious ambiance throughout. The primary bedroom is thoughtfully separated from the other three bedrooms, ensuring privacy. Two of the additional bedrooms share a Jack and Jill bathroom, accessed through a versatile ''teen room'' area, which could also serve as an ''in-law'' suite. The fourth bedroom is located down the hall, providing further flexibility. The expansive kitchen is perfect for entertaining, equipped with a gas stove, dual ovens, and a built-in microwave. You'll lov oversized island and ample cabinet space for all your culinary needs. The kitchen seamlessly connects to the great room, making it an ideal spot for gatherings with family and friends. Step outside through the double sliders to enjoy the backyard's lap pool, built in 2023 and pre-plumbed for gas heating. The home is also outfitted with numerous electrical outlets and pre-wired ceiling fans throughout. Additional insulation was added during construction to help keep cooling costs low during peak months. This property comes with an assumable VA loan with a balance of approximately $370,000 at an attractive 2.9% interest rate. Don't miss this opportunity to experience the best of Verrado living!

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17207 N 36th Street Phoenix, AZ 85032

$599,000

4 Beds

3 Baths

1,845 SqFt

Status Active

MLS # 6722409

Property Type Single Family Residence

Price Type --

Fully renovated, this charming 4BR / 3BA home is ideally situated near restaurants, shopping, dining, public transportation, with easy access to freeways. Recently remodeled, it features a spacious floor plan perfect for modern living. Neutral color scheme throughout featuring durable tile flooring, providing a versatile space for any decor. The kitchen is equipped with quartz countertops, new cabinets and windows plus a convenient pantry. The oversized primary bedroom offers direct backyard access, a private bathroom, and walk-in closet. Outside, the backyard includes a covered patio, storage shed, and plenty of space to create your own oasis. No HOA!

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1681 E Grand Ridge Road Queen Creek, AZ 85140

$599,000

3 Beds

2.5 Baths

2,579 SqFt

Status Active

MLS # 6725715

Property Type Single Family Residence

Price Type --

$$$ Shea base price is $612k, add your $50k in personal touches for instant equity. Don't miss out on the best per SQ FT deal in the community. This Tarragona Model stands out as one of the most sought-after designs, featuring a spacious open floorplan. Highlights include an oversized family room, 2 expansive bedrooms, 2.5 baths, and a Chef's Kitchen with dual islands and granite countertops. Additionally, a versatile den offers potential as a third bedroom. Two separate patios enhance the appeal of this North/South facing homesite. The Primary suite is generously sized and includes a luxurious bathroom with tiled shower and granite counters. Discover a unique ''Secret Room'' offering flexible usage options. This homes also offer a Solar System for top of the line energy efficiency.

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12064 S 186th Avenue Goodyear, AZ 85338

$599,000

4 Beds

3 Baths

2,543 SqFt

Status Active

MLS # 6719055

Property Type Single Family Residence

Price Type --

With full price offer, seller to provide $20k concession towards the complete payoff of remaining solar loan, or towards buyers choosing. This is your chance to secure a home in the highly sought after INSPIRE community of Estrella Mountain Ranch! Boasting a 4 bedroom 3 bathroom, split floor plan; this home sits on a premium oversized lot and has an open great room floor plan. Kitchen upgrades include: RO Water System, dark maple cabinetry with sliding shelves, crown molding, granite countertops, stainless appliances, and large island. The primary suite is generously sized and features a spa like bathroom with custom tile and a spacious walk-in shower. The front and backyard has been meticulously landscaped and upgraded. You will enjoy low maintenance plants, backyard turf, exterior sun screens on the sun exposed side of home, and pergola in addition to the covered patio. Storage is abundant here, the oversized 2 car garage has an additional storage area, storage cabinets, and overhead storage. Additional upgrades include plantation shutters throughout the entire home, wide porcelain plank wood-look tile floors throughout living areas & baths, granite countertops & upgraded mirrors in all baths, water-softener system, & much more! This home comes equipped with a large solar panel package, greatly reducing electricity costs throughout the year. See additional information in documents tab. Solar system was installed in Oct 2019. Total value if paid off over the term of the loan would have been $55,000. Residents of Estrella Mountain Ranch enjoy access to two resident centers equipped with state-of-the-art fitness facilities, community rooms, and outdoor gathering spaces. Additionally, residents can take advantage of the pickleball and tennis courts, two community pools, and a water park with water slides. Outdoor lovers will appreciate the extensive network of over 50 miles of hiking and biking trails, which offer opportunities to explore the breathtaking landscape surrounding the community. Come and discover the magic of life in this vibrant community!

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2322 S Rogers -- Unit 16 Mesa, AZ 85202

$599,000

6 Beds

4 Baths

2,732 SqFt

Status Active

MLS # 6722677

Property Type Single Family Residence

Price Type --

This beautiful home is located inside the gated community of Legante Paseo in highly desirable Dobson Ranch & backs to the 3rd fairway of the golf course. The front entry leads to your formal living & dining area w/ a 2-way fireplace that is shared w/ the family room next to the open kitchen. The property features 6 bedrooms & 4 bathrooms including 3 primary bedrooms w/ en-suites (one on main floor). The two primary bedrooms upstairs also feature a balcony to enjoy sunsets & the golf course. Kitchen & bathrooms have been beautifully remodeled in addition to other upgrades including HVAC (2019) & newer appliances. The private community also has its own community pool & ramada area. Don't miss out on your chance to own one of the few properties available in this piece of paradise!

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4596 W Loma Verde Avenue Eloy, AZ 85131

$599,000

2 Beds

2.5 Baths

1,910 SqFt

Status Active

MLS # 6723595

Property Type Single Family Residence

Price Type --

Situated behind the gates of the highly sought after Retirement Community Robson Ranch, This Home is waiting for you. Completed in Dec 2023, this Spanish Ranch leaves nothing to be desired. As you Enter the home you are greeted with a wide foyer and an office/den to the right. Just down the hall, you'll find a half bath perfect for guests, and the first of two En suites complete with upgraded white cabinetry, Beautiful shower with modern tile and a complementary mosaic tile stripe completes the overall aesthetic. As you step into to the open concept living and dining, you are greeted with natural light from every angle. The kitchen boasts upgraded white cabinetry, gorgeous quartz countertops, an oversized island, gorgeous pendants, stainless steel appliances, and a built in cocktail bar in the dining room. The Second En suite offers a walk in closet, double sinks, an oversized shower complete with the same tile, mosaic stripe, and white cabinetry giving a cohesive, well thought out design aesthetic not only to this space, but to the entire home. You'll also enjoy Electric blinds throughout the home adding that touch of Luxury. Out back you'll find an extended covered patio complete with pavers, a built in BBQ, a Hot Tub, and professional desert landscape and artificial turf giving you all the beauty while leaving you with minimal maintenance.

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2328 E Laurel Lane Phoenix, AZ 85028

$599,000

3 Beds

2 Baths

1,619 SqFt

Status Active

MLS # 6724018

Property Type Single Family Residence

Price Type --

Beautifully remodeled 3-bedroom, 2-bathroom property with mountain views. The open floor plan features a kitchen with new white cabinets, stainless steel appliances, quartz countertops, and an island. The large family room is perfect for gatherings. The bathrooms boast custom-designed showers. Roof and main AC unit 2019. This house has everything you've dreamed of and more.

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