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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5711 E Greenway Street Mesa, AZ 85205

$595,000

4 Beds

3 Baths

2,201 SqFt

Status Active

MLS # 6780661

Property Type Single Family Residence

Price Type --

Welcome to the desirable Alta Mesa neighborhood! This spacious cul-de-sac home features a versatile finished split-level basement, complete with a large bedroom and full bathroom, perfect for an in-law suite, home theater, game room or gym. Enjoy energy savings with a brand-new, paid-off solar system—no complicated lease! The new roof and AC provide comfort and peace of mind year-round. The stunning kitchen boasts custom cabinets, granite island countertops, and a large pantry. Freshly painted interiors create a bright, inviting atmosphere, ready for your personal touch. The expansive private backyard is a summer oasis, adjacent to a sparkling pool for relaxation. Nestled among lush golf courses and community parks, this home combines serene living with easy access to outdoor recreation. Located just minutes from Boeing, grocery stores, Mendoza Elementary, and Shepard High School, this property has it all. Don't miss your chance to own a beautiful home in a fantastic location!

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7610 W Orangewood Avenue Glendale, AZ 85303

$595,000

3 Beds

2 Baths

2,105 SqFt

Status Active

MLS # 6782224

Property Type Single Family Residence

Price Type --

Huge lot Ranch and horse property in the middle of the West Vally. More than half an acre for your RV, boat and toys. Two way fireplace from master bedroom to living room. HOME CONVEYS AS-IS AND VERIFY ALL IMPORTANT INFORMATION NECESSARY at BUYER'S EXPENSE. HOME INSPECTION ENCOURAGED. SELLER WILL NOT DO REPAIRS OR CLEANING. NO SIGN ON PROPERTY. With some updating & proper cleanup this property will be a lot more than the asking price. Compare the price on the active listing on the same street.

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15646 S 43rd Way Phoenix, AZ 85048

$595,000

4 Beds

2.5 Baths

1,947 SqFt

Status Active

MLS # 6781941

Property Type Single Family Residence

Price Type --

This 4 bed 2.5 bath home offers ample yet cozy space. As you step in you will notice the cathedral ceilings and the pillar off of the foyer. The kitchen has the space for entertaining and cooking as it flows directly into the family room and you will find all the bedtooms upstairs. The backyard features a pool and even more room to entertain or just relax on a sunny day. The home is located close to shopping dinning and is minutes away from major freeways.

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7122 W Spur Drive Peoria, AZ 85383

$595,000

3 Beds

2 Baths

1,737 SqFt

Status Active

MLS # 6785445

Property Type Single Family Residence

Price Type --

Don't wait for a new build—you have it all in this 2020 built Pulte Sagebrush model! This stunning 3-bedroom, 2-bathroom home is perfectly situated on a desirable corner lot in the sought-after Aloravita neighborhood, featuring multiple playgrounds and beautiful green spaces for gathering with friends and family. The home boasts a thoughtfully designed floor plan with a stunning color palette throughout, a large covered patio for outdoor living, and a beautifully landscaped backyard with room for entertaining and children's play. Inside, you'll find a modern kitchen with quartz countertops and premium finishes, a spacious primary suite extended 2 feet in the bedroom and luxurious en-suite bathroom. The separate laundry room is complete with cabinets and a laundry sink. Additional upgrades include a tankless water heater and water softener. An ideal location near shopping, top-rated schools, and within a popular school district. This home offers comfort, style, and conveniencedon't miss this opportunity!

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3281 N Eagles Creek Drive Show Low, AZ 85901

$595,000

3 Beds

2 Baths

1,737 SqFt

Status Active

MLS # 6751334

Property Type Single Family Residence

Price Type --

Nestled in a tranquil neighborhood, this beautiful home offers a perfect blend of comfort, style, and convenience. As you step inside, you are greeted by a spacious and open floor plan that seamlessly combines modern design with a warm and welcoming ambiance. The well-appointed kitchen is a chef's dream, featuring sleek countertops, ample cabinet space, and state-of-the-art appliances. Whether you're hosting a family gathering or enjoying a quiet meal, this kitchen is sure to impress. The living area is thoughtfully designed with a focus on both relaxation and entertainment. The generous windows fill the space with natural light, creating an inviting atmosphere for both residents and guests. Spend cozy evenings by the fireplace, creating cherished memories or unwind on lazy afternoons while enjoying your favorite book. The bedrooms are generously sized, providing a peaceful sanctuary for rest and relaxation. The master suite is a true retreat, boasting a private ensuite bathroom and ample closet space. Wake up rejuvenated and ready to take on the day in this luxurious haven. Step outside to discover a covered deck, perfect for hosting outdoor gatherings or simply enjoying the fresh air. Whether you're entertaining guests or savoring a quiet moment, the spacious deck offers a delightful space for relaxation and enjoyment. Create lasting memories as you gather around the fire pit, roast marshmallows, and share stories under the starry night sky. Located in the desirable city of Show Low, this home provides convenient access to a wealth of amenities. Explore the nearby parks, indulge in local dining, or take advantage of the recreational opportunities available in the area. With its picturesque surroundings and welcoming community, Show Low offers a quality of life that is second to none. Don't miss out on the opportunity to make 3281 N Eagles Creek Drive your forever home. Embrace a lifestyle of comfort, elegance, and convenience in this remarkable property.

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40937 N Majesty Way Anthem, AZ 85086

$595,000

4 Beds

2.5 Baths

2,469 SqFt

Status Active Under Contract

MLS # 6750370

Property Type Single Family Residence

Price Type --

*VA ASSUMABLE LOAN AT 3%. LEASED SOLAR PAID OFF.* Location is everything! This home is settled in a quiet neighborhood with a trail entrance right next door connecting you to 13 miles of lush desert trails, 2 parks within a 5-minute trail walk, and the K-8 elementary school is just blocks away. Not to mention the one-of-a-kind comraderie and sense of community this neighborhood offers. This spacious ''Tradition'' floor plan is coveted for it's vaulted ceilings throughout the living space, and fluid layout perfect for hosting and family-time. The large kitchen island, pantry, and wall of cabinets creates the ultimate culinary experience. Conveniently located on the main floor, the extra large primary suite has private backyard access and a large walk in closet. Maintaining privacy, the 3 additional bedrooms and full bathroom are located upstairs. With the 3-car garage, overhead garage storage, multiple walk in closets, custom built-in bookcases, storage under the stairs, and an RV-gate, this property provides all the storage a family could need! This property is on a premium lot where you can enjoy the beautifully designed and low-maintenance backyard with synthetic grass, pavers, a large extended covered patio, and a view fence showing off stunning desert scenery and colorful sunsets!

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7701 E Palm Lane Scottsdale, AZ 85257

$595,000

3 Beds

2 Baths

1,575 SqFt

Status Active Under Contract

MLS # 6767591

Property Type Single Family Residence

Price Type --

Well cared for, a 3 bedroom home with 2baths ,2 car garage ,that is move in ready or ready for you to update to your liking! New AC and water heater in last 24 months, seller even had the sewer pipes sleeved as a preventative measure in the last year. Ample living space inside the home and a beautiful flagstone patio with built in grill and all around new patio covering . Wonderful opportunity in a highly desired Scottsdale subdivision brought to you at a bargain price. You cannot find a better price for a home in this condition with a wood burning fireplace to boot. Shopping within walking distance, and very near Old Town Scottsdale. Walk your dog, ride your bike, or play sports at El Dorado Park across the street. Owner occupied only. See lister for more details

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656 W Minton Drive Tempe, AZ 85282

$595,000

3 Beds

2.5 Baths

2,187 SqFt

Status Active Under Contract

MLS # 6768583

Property Type Single Family Residence

Price Type --

Move in ready super clean two-story home. Cheery and bright throughout with no carpet! This home has been freshly painted, and updated with new granite countertops, new kitchen sink, new light fixtures and faucets replaced. Great 3 bed 2.5 bath open spacious light & bright floorplan. Family room open to kitchen separate Formal living and dining. Ample storage space, Upstairs loft area with built in desk and shelving. Well laid out backyard with mature landscaping, pool and spa. RV gate and extra concrete slab on side of home. Home has a whole home water filtration system to be able to drink from any faucet. Must see home in a fabulous Tempe location near ASU, the I-10, the 60, the airport, and just minutes from Downtown, convenience is at your doorstep.

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7674 E Whispering Mesquite Lane Gold Canyon, AZ 85118

$595,000

2 Beds

2 Baths

1,922 SqFt

Status Active Under Contract

MLS # 6774751

Property Type Single Family Residence

Price Type --

Located in the desirable Mountainbrook Village community, this home offers stunning golf course and mountain views. This beautifully updated home features two primary bedrooms, vaulted ceilings, massive windows, and a spacious layout with high-end finishes like granite countertops and plantation shutters. Enjoy outdoor living with a tiled courtyard, covered patio, and air-conditioned garage with a separate workshop. With a central vacuum system, soft water, and RO systems, this home blends comfort and convenience, perfect for enjoying the best of Gold Canyon living. Mountainbrook Village is a scenic golf course community set against the stunning Superstition Mountains. It offers beautifully designed homes and resort-style amenities, including a golf course, fitness facilities, and social clubs. With a relaxed yet active lifestyle, it's perfect for those seeking a peaceful desert setting with plenty of recreational opportunities.

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7838 E Buena Terra Way Scottsdale, AZ 85250

$595,000

2 Beds

2.5 Baths

1,485 SqFt

Status Active Under Contract

MLS # 6775629

Property Type Townhouse

Price Type --

This gorgeous single level, move-in ready townhome has a split floor plan with two oversized bedrooms both ensuite, a gorgeous shady patio, 2 car attached garage, excellent curb appeal with a gated private front patio. Home is located directly next to the heated community pool and spa. Newer water heater (2020) roof has been completely resealed (2020), New A/C (2020) The updated eat-in kitchen offers upgraded cabinetry, quartz counters, tile backsplash, chrome hardware, and newer appliances and hood. The open great room has a vaulted ceiling with painted beams, fireplace, and wet bar with upgraded cabinetry and quartz counters. Other features include hexagon tile flooring, luxury vinyl flooring, upgraded porcelain tile bathroom flooring. No carpet throughout. Gorgeous lush patios.

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1341 Leisure World -- Mesa, AZ 85206

New

$595,000

3 Beds

2 Baths

1,882 SqFt

Status Active Under Contract

MLS # 6787238

Property Type Single Family Residence

Price Type --

Enjoy this Amazingly Beautiful FULLY REMODELED 3 Bedroom, 2 Bath, 2 Car Garage Home on #4 of Heron Lakes Golf Course! The front entrance with aluminum pergola is very inviting! Enter into the very open and spacious home with vaulted ceilings, recessed lighting and upgraded ceiling fans. Your Dream Kitchen w/large Peninsula style Island, Granite countertops, all 2024 Appliances is great for anyone who loves to cook and entertain! The living & Dining space have beautiful golf course views! The Large Primary Bedroom has a HUGE Closet done by Classy Closets! Enjoy Entertaining on the resort style back patio with travertine tiles. All this in the Premiere Active Adult Community of Leisure World with 36 holes of private golf, new tennis complex, pickle ball, swimming pools, library, and more!

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22033 N Golf Club Drive Sun City West, AZ 85375

$595,000

2 Beds

2.5 Baths

2,656 SqFt

Status Active

MLS # 6766525

Property Type Single Family Residence

Price Type --

Welcome to your dream home in the vibrant, active adult community of Sun City West! Perfectly located near the Palm Ridge Recreation Center and surrounded by multiple golf courses, this beautifully updated home offers the ideal blend of modern comfort and resort-style living. In 2024, the home received significant updates, including sleek granite countertops, most new appliances, and upgraded light and plumbing fixtures throughout. The majority of the home features elegant tile flooring, with plush carpet in the Den and master bedroom for added comfort. The updates also include taller baseboards and fresh interior paint, giving the entire space a crisp, modern feel. As you step inside, you're greeted by a grand entrance, soaring ceilings, and a spacious open floor plan filled with natural light. This clean, bright home offers plenty of room for both entertaining and relaxation. The 2.5-car garage provides ample space for parking and storage, making it ideal for your vehicles and hobbies. The home is situated on a quiet street with minimal traffic, offering peace and privacy. Outside, the fenced lot features an array of mature citrus trees, creating your own private oasis. With its close proximity to the Palm Ridge Recreation Center and numerous nearby golf courses, this home is perfectly positioned for an active, enjoyable lifestyle. Don't miss your chance to own this stunning, move-in-ready home!

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