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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1357 W Port A Sail Drive Gilbert, AZ 85233

$580,000

3 Beds

3 Baths

1,797 SqFt

Status Active

MLS # 6741454

Property Type Single Family Residence

Price Type --

This stunning waterfront home in gated community offers breathtaking views with three bedrooms, third bedroom converted to an office, and three full baths. Freshly painted, this two-story residence exudes modern elegance and charm. The gourmet kitchen boasts granite countertops, newer appliances, and opens to a sunlit dining area, perfect for entertaining. The living room, featuring water views and a wood-burning fireplace. Each bedroom serves as a private haven, with the primary suite offering a luxurious en-suite bath. Outside, the beautifully landscaped yard, complete with turf and mature trees, provides the perfect setting for relaxing and enjoying the waterfront lifestyle. 2 A/C units 2020, water heater 2021, kitchen appliances 2021, lighting and house painted 20

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10536 W Villa Hermosa -- Peoria, AZ 85383

$580,000

3 Beds

2 Baths

2,493 SqFt

Status Active

MLS # 6744672

Property Type Single Family Residence

Price Type --

NO HOA!!! Highly sought after North Peoria home featuring a 3-car garage & a welcoming covered entry. Inside, you'll find 3 bedrooms plus a versatile den, along with family & living rooms, and a formal dining area—perfect for gatherings & relaxation. The kitchen has elegant granite counters, including a charming round granite table that stays, and convenient soft-closing cabinet drawers & doors. The master suite offers a spacious walk-in closet with custom shelving & access to the 3rd car garage. Buyer to choose between a sleek glass shower front or a restored separate shower/tub before close of escrow. Fall in love with the expansive enclosed patio & outdoor kitchen area. Conveniently located near schools, shopping, and entertainment, this home is ready for you to move in and enjoy!

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3061 E Santa Rosa Drive Gilbert, AZ 85234

$580,000

3 Beds

2.5 Baths

2,267 SqFt

Status Active

MLS # 6741746

Property Type Single Family Residence

Price Type --

Beautiful two-story gem in Gilbert is the one! This magnificent residence is located near hospitals, restaurants, shopping spots, and more. You'll love the remodeled interior featuring a generous open layout enhanced with decorative light fixtures, soothing paint, and luxury vinyl plank flooring. Spotless kitchen is a chef's dream, including SS appliances, quartz counters, recessed lighting, white shaker cabinetry, a subway tile backsplash, and an island with a breakfast bar. Discover a sizable loft upstairs, ideal for an additional living space! Retreat to the spacious double door entry main suite, a full ensuite, and a walk-in closet. Continue onto the lovely backyard, with a built-in BBQ, artificial turf, a hot tub, and a refreshing pool ready to enjoy.

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710 W 18th Street Tempe, AZ 85281

$580,000

3 Beds

2 Baths

1,792 SqFt

Status Active

MLS # 6743870

Property Type Single Family Residence

Price Type --

1-0 BUY DOWN AVAILABLE WITH THE PREFERRED LENDER! This charming 3-bedroom, 2-bath home is nestled with a gated courtyard, you'll immediately appreciate the serene grass area and shaded patio. The inviting family room seamlessly connects to the entertainer's kitchen, which features a farmhouse sink, stainless steel appliances, and more than ample storage. The warm-toned granite countertops offer generous space, including a breakfast bar and a versatile bar/desk area. The primary bedroom boasting a stylish en suite bath, complete with a spacious walk-in shower and walk-in closet. You'll love the additional storage options, including a hall room for pantry items or a spare refrigerator, a large laundry area with a folding counter and drawer storage, and a dedicated cabinet filled pet/craft/ sport equipment space. The rear bonus room provides flexibility...it could serve as a living, dining, or media room and opens directly to the backyard. Enjoy outdoor living on the expansive rear patio featuring a gazebo, synthetic grass, and a firepit. Plus, the property includes an expansive covered RV parking area, large sturdy sheds, and a garage workshop for all your storage or creative needs. This home truly offers both comfort and functionality! Plus, Clark Park is right next door and is a fantastic place with a wide range of amenities! Here's a quick overview of what you can enjoy there: Community Center: Great for classes, events, and community gatherings. Pool & Splashpad: Perfect for cooling off and having fun in the water. Basketball Courts: Ideal for pickup games or practice. Baseball Diamond: A spot for baseball games and activities. Dog Park: A dedicated space for your furry friends to play. Grills: For BBQs and outdoor cooking. Horseshoes Pit: A fun game for social gatherings. Ramadas: Shaded areas for picnics and parties. Volleyball Court: A place for beach-style volleyball games. Community Garden: A spot to grow plants and vegetables. Playground: A great area for kids to play and explore. It seems like Clark Park has something for everyone, whether you're looking to stay active, relax, or enjoy time with family and friends. Bus and light rail access is nearby - perfect for high school and college student/faculty commuting!

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12311 W Tigerseye Drive Sun City West, AZ 85375

$580,000

3 Beds

2 Baths

2,157 SqFt

Status Active

MLS # 6752337

Property Type Single Family Residence

Price Type --

Welcome to your Desert Oasis... Pride of ownership is definitely shown in this move in ready 3 bedroom 2 bath home with a retreat style backyard. The home has many updates in the kitchen, living room, formal dining/family room, bathrooms, flooring, Arizona room, pergola with 6 person hot tub, updated pool decking, and painted sidewalks. All major appliances included. Interior window shutters on all front windows and new mini spilt in the Arizona room. Don't miss this one of kind gem! Come see it today!

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2101 N Normal Avenue Tempe, AZ 85288

$580,000

3 Beds

2 Baths

1,513 SqFt

Status Active

MLS # 6753795

Property Type Single Family Residence

Price Type --

Newly remodeled home with fresh interior paint and new front landscaping!Fresh blue exterior paint, dual pane windows, and recent plumbing and electrical updates.Beautiful wood flooring throughout the home, recessed lighting, barn doors, and TWO entertainment rooms await you inside. Large shaker cabinets w/crown molding, granite counters, stainless steel appliances, custom tile backsplash, & a center island w/breakfast bar. The covered patio and fire-pit is the ideal place for all your gatherings under the vast Arizona sky. Located in a quiet neighborhood just minutes from Old Town Scottsdale, ASU, the Entertainment District! This property qualifies for 1% lender credits available to a qualified buyer! If not already working with another lender, please see the lender flyer in docs tab f

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17052 N 36th Court Phoenix, AZ 85032

$580,000

4 Beds

2 Baths

2,018 SqFt

Status Active

MLS # 6756073

Property Type Single Family Residence

Price Type --

2 master bedrooms. HUGE lot, 1/3 of an acre! So much more opportunity with this property. No HOA. Cul-de-sac. RV gate. Pool just re-plastered! 4 bedrooms, 2 bathrooms. Double master suites. 2 huge walk-in closets in master suite. Master bathroom upgraded with new shower tile. New floors throughout. The entire house painted inside and out. New quartz countertops in the kitchen. Two large living areas, great space for entertaining and gathering. A must see home!

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4344 E Granada Road Phoenix, AZ 85008

$580,000

3 Beds

2.5 Baths

2,108 SqFt

Status Active

MLS # 6754410

Property Type Townhouse

Price Type --

This home is a must see! Well appointed townhouse in gated community in high demand area. Built in 2022 by D.R. Horton. Incredible location, just a 10 minute Uber to Sky Harbor Airport. Easy freeway access and close to everything Arcadia, Biltmore, Tempe, Scottsdale and Downtown Phoenix have to offer. 70 walk score and 89 bike score! This is a spacious home with a large loft. It's the largest model offered in the community at 2108 sq ft, featuring 3 bedrooms, 2.5 bathrooms, office and a loft. Tall 10' ceilings and 8' doors. 2 car private garage. Only 2 doors away from a nice community pool. Makes an excellent ''lock and leave'' house with the gated entrance and low maintenance backyard landscaping (artificial turf and pavers)

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12520 E Crystal Forest -- Gold Canyon, AZ 85118

$580,000

4 Beds

3.5 Baths

2,464 SqFt

Status Active

MLS # 6756661

Property Type Single Family Residence

Price Type --

You'll LOVE this beautiful home in Peralta Canyon! Providing 4 beds, 3.5 baths, 2-car garage, & a low-care landscape. Just off the front entry is the versatile den! Continue onto the spacious open layout paired with elegant light fixtures, tile flooring, designer paint, abundant natural light, and multi-sliding doors to the back. The gourmet kitchen boasts sleek SS appliances, quartz counters, mosaic tile backsplash, ample espresso cabinetry, a walk-in pantry, and a prep island w/breakfast bar. Berber carpet in the bedrooms! Primary bedroom has an ensuite with two vanities & a walk-in closet. One other bedroom also includes its own bathroom. Discover the charming backyard, offering a covered patio, well-laid pavers, artificial turf, & a fireplace area w/built-in seats.

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4386 E Selena Drive Phoenix, AZ 85050

$580,000

3 Beds

2.5 Baths

2,171 SqFt

Status Active

MLS # 6758795

Property Type Single Family Residence

Price Type --

HUGE PRICE REDUCTION!! This beautiful 3-bedroom, 2.5-bathroom home boasts a bright, open layout. As you enter, you're greeted by a spacious living area that flows seamlessly into the dining and kitchen spaces perfect for entertaining. Upstairs, you'll find three generously sized bedrooms, along with a large flex room—perfect for a home office, playroom, or additional living space. The primary suite is split and offers a private retreat with an ensuite bath and walk-in closet. Located on a picturesque, tree-lined street, the curb appeal is undeniable. The patio is a private oasis, ideal for outdoor dining or simply enjoying the Arizona sunshine. Easy access to local schools, parks, and shopping, don't miss out on this North Phoenix Gem!

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1618 W Maplewood Street Chandler, AZ 85286

$580,000

3 Beds

2 Baths

1,647 SqFt

Status Active

MLS # 6760343

Property Type Single Family Residence

Price Type --

Location, Location, Location! Nestled in the prestigious Pecos Ranch in the heart of Chandler, near the Price Corridor and its high-tech companies, this expansive waterfront lot is perfectly situated right by a community park, offering stunning views and direct lake access—ideal for all your favorite water sports and leisure activities. This breathtaking single-level home has been recently remodeled, boasting luxury Vinyl flooring, freshly painted neutral walls, modern quartz kitchen countertops, and contemporary lighting fixtures throughout. French doors in the family room and large windows in the kitchen frame the serene lake views, creating a tranquil living environment. The master bedroom features an en-suite bathroom with direct access to the backyard, perfect for enjoying the peaceful outdoors. With proximity to major freeways like the 101, 202, 60, and I-10, this home offers unparalleled access to Chandler's best schools, top-rated hospitals, and main shopping destinations, including Costco and Chandler Fashion Center. Discover the ease of urban living in a suburban paradise.

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3942 E Cat Balue Drive Phoenix, AZ 85050

$580,000

3 Beds

2.5 Baths

1,583 SqFt

Status Active

MLS # 6772422

Property Type Single Family Residence

Price Type --

LOCATION LOCATION LOCATION Discover modern living in this beautifully updated 3-bedroom, 2.5-bathroom patio home nestled in the sought-after Fireside at Desert Ridge gated community. Step inside to an inviting open floor plan, featuring california shutters, plank tile flooring and an updated kitchen with white cabinetry throughout the home, beautiful quartz counter tops, a farmhouse sink and newer black stainless steel appliances including a gas stove! The primary bedroom features a walk in closet and remodeled walk in shower. Bedroom 2 and 3 are split in close proximity to a full bathroom and brand new carpet throughout the second floor. The cozy outdoor patio is designed for easy maintenance and offers a great space for relaxing or entertaining. Fireside at Desert Ridge community provides residents with access to resort-style amenities including a fitness center, tennis courts, basketball courts, Pickelball courts, resort style pool, lap pool, and scenic walking trails. Conveniently located near top-rated schools, parks, and the Desert Ridge Marketplace for dining and shopping, this updated patio home is move-in ready and waiting for you!

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