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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10206 W Piccadilly Road Avondale, AZ 85392

$584,990

4 Beds

3 Baths

2,815 SqFt

Status Active

MLS # 6772257

Property Type Single Family Residence

Price Type --

MLS#6772257 January 2025 Completion! Discover modern living at Parkside Los Cielos with our 40-RM4 floorplan, a spacious two-story home featuring 4 bedrooms and 3 baths. The open-concept layout effortlessly blends the dining room, kitchen, and great room, creating an ideal space for daily living and entertaining. A private bedroom and bathroom are conveniently located at the front of the home, offering a quiet retreat. Upstairs, the primary bedroom awaits with a large walk-in closet and shower, accompanied by two more bedrooms. Experience the perfect balance of comfort and style in this thoughtfully designed home. Structural options include: 4th bedroom and full bath on 1st floor, paver driveway, loft in lieu of upstairs bedroom, large tandem garage, large mud room, vaulted ceilings.

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20251 W Catalina Drive Buckeye, AZ 85396

$584,990

4 Beds

3 Baths

2,456 SqFt

Status Active

MLS # 6747889

Property Type Single Family Residence

Price Type --

QUICK MOVE-IN HOME! MOVE INTO YOUR NEW HOME BEFORE THE HOLIDAYS! SPECIAL FINANCING WITH BELOW MARKET INTEREST RATES AVAILABLE! MOVE-IN PACKAGES AVAILABLE! PLEASE INQUIRE ABOUT THESE SPECIALS ON THIS QUICK MOVE-IN HOME AND OTHERS. ACT SOON BEFORE IT IS TOO LATE! It's the Amethyst floor plan with 3 bedrooms + study, 3 full baths and 3 car garage. Pavers at drive, walk and entry. Large walk in shower at owner's bath. 12x8 sliding glass door that leads out to your extended covered patio. Sonoma maple Linen-off white cabinets with hardware in kitchen with 42'' kitchen uppers and pull out trash drawer with two bins. AZT Tawny Quartz countertops in kitchen and at the enhanced island. Kitchen sink is a black under mount single bowl sink. 8' tall interior doors. Upgrade flooring includes Beaumont Olmo 7x24 plan tile in all areas of the home except bedrooms and closets. Dual sink at bath 2. Soft water loop, gas stub for future BBQ. Please verify information with onsite agent. Thank you!

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3438 E Betsy Lane Gilbert, AZ 85296

$584,990

4 Beds

2.5 Baths

2,909 SqFt

Status Active

MLS # 6739064

Property Type Single Family Residence

Price Type --

Now with a strategic price adjustment—this opportunity is too good to pass up! This move-in-ready 4-bedroom beauty in Higley Park won't last long! The versatile floor plan offers THREE EXTRA living spaces—ideal for a den, home office, or cozy loft—giving you endless options to suit your lifestyle. The sellers have meticulously prepared this home, and it shows. With fresh paint, a new AC unit, and abundant storage, this home combines comfort, style, and functionality. You'll love the expansive primary suite featuring a grand bedroom, luxurious bathroom, and an oversized walk-in closet that's truly a must-see. Step outside to enjoy tree-lined streets, parks, walking trails, and a refreshing community pool. Located just a short stroll from Agritopia and Gilbert's Epicenter, where fantastic dining and shopping await. With close proximity to Loop 202, San Tan Mall, and excellent schools, this location is unbeatable. Take advantage of this newly priced gem tour today and make it yours!

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262 S 164th Drive Goodyear, AZ 85338

Open House

$584,990

4 Beds

3 Baths

2,510 SqFt

Status Active

MLS # 6754928

Property Type Single Family Residence

Price Type --

QUICK MOVE-IN HOME! MOVE INTO YOUR NEW HOME BEFORE THE HOLIDAYS! SPECIAL FINANCING WITH BELOW MARKET INTEREST RATES AVAILABLE! MOVE-IN PACKAGES AVAILABLE! PLEASE INQUIRE ABOUT THESE SPECIALS ON THIS QUICK MOVE-IN HOME AND OTHERS. ACT SOON BEFORE IT IS TOO LATE! It's the Jade floor plan with 4 bedrooms all with walk in closets. 3 full baths. Everything is large in this home. Lot large enough for an 8' gate. Large owner's entry (mud area) as you walk in from the 3 car garage. Multi slide door off the spacious great room. Owner's bath has a large walk in shower with tile surrounds and floor. Pavers at drive, walk and entry. Stainless steel gas appliance package with 30'' cooktop, wall oven, microwave, canopy hood. Barnett painted Boulder cabinets. AZT Hana Sky quartz countertops at kitchen and expanded kitchen island. Dual sinks at bath 3. DT Broxburn gray 6x24 plank tile in all areas of the home except closets and bedrooms. Dual sinks at bath 3. Please verify all information with onsite agent. Thank you!

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4827 Raven Circle Happy Jack, AZ 86024

$584,950

3 Beds

2.5 Baths

2,760 SqFt

Status Active

MLS # 6674098

Property Type Single Family Residence

Price Type --

Beautiful log cabin located in Happy Jack, escape the heat and busyness of your life. This great home sits on an acre with pines, oaks and junipers, great 3/4 wrap covered composite deck. Main floor has beautiful hardwood floors, vaulted ceiling, great brick fireplace, master bedroom/bath, office/den or extra living area, great room and an amazing kitchen and dining area. Great wood plank stairs lead upstairs to 2 bedrooms, bath and a great cozy playroom for the kids. This custom home offers many upgrades on the kitchen cabinets, windows, wood beams and more. You will fall in love sitting inside looking at the great interior or sitting on the covered patio watching the wildlife and listening to the peacefulness of Happy Jack. Bring your buyers, motivated seller.

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16006 W Electra Lane Lane Surprise, AZ 85387

$584,930

3 Beds

3 Baths

2,229 SqFt

Status Active

MLS # 6764927

Property Type Single Family Residence

Price Type --

New home ready for immediate occupancy! This single level 2225 SF single level 3 BR, 3. BA home is located on a north south facing home site. Surrounded by single level homes, no 2 stories. Exciting included features include white cabinets, upgraded granite tops, tile Kitchen backsplash, plank tile on the floors, 10' ceilings, 8' interior doors, 3 car garage, gourmet kitchen, garage service door, tank less water heater, Front Yard landscape, and so much more. Neighborhood includes, tree lined streets, Community Aquatic Center, Picleball Courts. Certified Energy Star and Indoor Air Plus for more energy savings.

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18411 N 46th Place Phoenix, AZ 85032

$584,900

3 Beds

2.5 Baths

1,748 SqFt

Status Active

MLS # 6783837

Property Type Single Family Residence

Price Type --

Welcome to this spacious 2-story home offering 3 bedrooms and 2.5 bathrooms. The home features a bright and airy main level with a spacious living room, kitchen, and a separate dining area. Just a few steps down, discover an inviting family room and convenient half bath, ideal for family and friend gatherings! Upstairs, you'll find the master suite with fireplace complete with a private ensuite bath, alongside additional bedrooms. You can enjoy the convenience of a two-car garage. This home provides ample parking and storage options. Lastly stepped into your backyard that has a brand new pool that the homeowner designed with endless taste and design. Set up your showing today and lets get you into your new home.

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1300 W 7th Street Tempe, AZ 85281

$584,900

6 Beds

4 Baths

2,441 SqFt

Status Active

MLS # 6733783

Property Type Single Family Residence

Price Type --

**AMAZING 6bd/4bath HOME ON A HUGE LOT IN THE HEART OF TEMPE & NEAR ASU!** This is the perfect investment or rental property! Featuring: 2441 sq.ft of Living Space, Fresh Interior Paint, easily maintained Tile, Formal Living Room, Massive Family Room, Dining Area, Kitchen with Refinished Cabinets, Gas Stove, Refrigerator & Dishwasher, 6 Good Sized Bedrooms, 4 bathrooms (1 Newly Remodeled)+ A HUGE FLEX ROOM (potential 7th bedroom), Upgraded Dual Pane Windows, Custom Fans & AC is serviced regularly. Washer/Dryer & additional Refrigerator included. Flex Room at the back of the home also has separate entry. The Giant Family Room is perfect for a large game room/office/home theater and has 2 additional closets for extra storage. NO HOA, perfect for AIRBNB, Rental or a Large Family Home! This home is perched on almost a 10,000sf lot and has and additional storage shed on a slab in the backyard that provides tons of extra storage space. Your extended driveway has enough slab spaces in the front to park at least 7 cars. Location is walking distance from Mill Ave shops and restaurants/entertainment + ASU! This is a must see property!!!

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26964 N 104th Lane Peoria, AZ 85383

$584,900

4 Beds

3 Baths

2,605 SqFt

Status Active

MLS # 6733026

Property Type Single Family Residence

Price Type --

Welcome to Northlands Encore in North Peoria, the best value for the money in the area, where the skies are bigger and the sunset glow fills the sky with radiant pink, orange, and purple. Step outside every morning and view the beautiful Calderwood Butte out your front door, with private backyard mountain views and the trail head right down the street, you'll get the full enjoyment of this very special home in an extraordinary community. Step inside this move-in ready 2-story Amethyst Model by Taylor Morrison, with over 2605 sq. ft. of living space, 4 BED + LOFT + 3 BATH, and a 2 CAR temp controlled garage. NEW CARPET was just installed in the living room and throughout the entire 2nd level! The main level features an open concept main living area, light and bright neutral color pallet throughout, white trim, blinds, and doors. Convenient main-level bedroom and full bath, currently used as a home gym. Open concept kitchen and dining area with light gray tile floors, can-lighting, contrasting twilight cabinets, dark gray granite countertops and island, a stainless steel GE appliance package, and a walk-in pantry for all your storage needs. The upper level features a large open loft, which can be used as another living space, office, or game area. Master suite with full master bath, featuring a tub and shower combo, double sinks, and a walk-in closet. Split floor plan with 2 additional bedrooms and a full bathroom. Step out back and take a deep breath, with no back neighbors and beautiful mountain views. Large, brick paver covered patio w/fan, outdoor kitchen w/ serving area for dining outdoors, centered green space with a play area to the side. SOLAR will be paid at closing! Neighborhood and property mountain views, close proximity to 303 freeway access, shopping, dining, entertainment, health care, and less than 20 min. away from beautiful Lake Pleasant Regional Park. A list of full updates available in the documents tab, there truly is nothing to do except move in.

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8961 W Maui Lane Peoria, AZ 85381

$584,900

3 Beds

3 Baths

2,245 SqFt

Status Active

MLS # 6759656

Property Type Single Family Residence

Price Type --

Private lake living, priced way below market value. This home is spacious with beautiful lake views, and with remodeling of cabinets and floors, it will be spectacular. The current owners priced this three bedroom, three bath home, so the new owners can make the changes with their personal design choices. Take a look and imagine making this house not only an excellent investment, but also your beautiful lake front home.

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5265 S Dante Road Mesa, AZ 85212

$584,900

3 Beds

2 Baths

2,020 SqFt

Status Active

MLS # 6766105

Property Type Single Family Residence

Price Type --

Just reduced and priced to sell! Don't miss this upgraded 3 BR, 2 BA home with a den/office in the desirable Bella Villa neighborhood of East Mesa. Situated on a secluded lot w/ mtn views and one neighbor, this home is move-in ready! The exterior features a custom brick paver walkway, beautiful landscaping, and a private backyard oasis. Inside, the open floor plan offers high ceilings, tile floors, new carpet in the bedrooms & ample natural light. The kitchen is a chef's dream with rich mahogany cabinets, granite countertops, a breakfast island, RO water system, walk-in pantry, and stainless-steel appliances. Great room is perfect for entertaining, w/built-in theater wall, pre-wired surround sound, recessed lighting, and plantation shutters. Low rate VA assumable loan available to non vet The master suite includes a bay window, walk-in closet, and private bath. The backyard is a retreat with an extended paver patio, solar-lit walkway, lush grass, and stunning mountain views. Bella Villa offers walking trails, playgrounds, and a dog park. Come experience the perfect blend of modern living and natural beautythis home won't last long!

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4077 S Sabrina Drive Unit 63 Chandler, AZ 85248

$584,900

4 Beds

3 Baths

1,775 SqFt

Status Active

MLS # 6767230

Property Type Townhouse

Price Type --

Discover this lovely 4-bedroom end-unit townhome in the gated community of Echelon at Ocotillo! Enjoy a welcoming front patio with well-laid pavers, perfect for relaxing and watching breathtaking sunsets. The spacious great room boasts high ceilings, a soothing palette, recessed lighting, window blinds, and durable tile flooring. The gourmet kitchen features granite counters, white cabinetry with crown molding, subway tile backsplash, stainless steel appliances, and an island with a breakfast bar. The well-sized primary bedroom offers soft carpeting, an ensuite with double sinks, and a walk-in closet. This smart home also provides fantastic community amenities, including a playground, picnic spots, and a refreshing pool/spa. Make this gem yours today!

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