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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5000 N Camelback Ridge Road Unit 201 Scottsdale, AZ 85251

$2,475,000

2 Beds

2.5 Baths

1,847 SqFt

Status Active

MLS # 6782702

Property Type Apartment

Price Type --

Experience elevated living at Ascent at the Phoenician! This brand new luxury condominiums will be ready for occupancy before the end of this year. Nestled on Camelback Mountain, this exclusive home features a high end bulthaup kitchen, Wolf & Sub-Zero appliancesa, beautiful fireplace, window coverings, washer and dryer and Waterworks fixtures. Enjoy a spacious wrap-around patio with a built-in gas grill, perfect for entertaining. Luxurious touches include fantastic tile and stone along with hardwood flooring throughout. Located within a brand new guard-gated community and adjacent to the Phoenician Resort, Ascent has outstanding new community amenities. Don't miss this first chance to be among the new residents of the most desirable resort community in town.

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23602 N 84th Place Scottsdale, AZ 85255

$2,475,000

6 Beds

5 Baths

4,874 SqFt

Status Active Under Contract

MLS # 6774258

Property Type Single Family Residence

Price Type --

Privacy & luxury in prime gated N Scottsdale Pinnacle Paradise. 1.7 acres, 4800+ sq ft, 6bd/5bth incl casita, paved circ. drive, pvt ctyd, 4 car cond. garage w tons of storage. Grand residence, meticulously cared for. Soaring ceilings, grt rm overlooks yard, pool, spa, & casita. Indoor/outdoor living at its finest. Cook's hub kitchen w/prep island, dbl ovens, lg pantry w/new wine cooler & pouring station. Bkfst nook overlooks expansive covered rear patio, htd pool and spa. Spacious fml dining, beamed vaulted ceilings, lots of windows overlook grounds. Wood plank flooring, travertine, 4 fireplaces. Secluded primary w/spa bath, soak tub, dual closets. Owned solar, little or no elec bill! New roof, fresh paint inside and exterior. This is indeed a rare find, near all N Scottsdale offers.

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4322 E Libra Place Chandler, AZ 85249

$2,475,000

5 Beds

4.5 Baths

5,539 SqFt

Status Active

MLS # 6777241

Property Type Single Family Residence

Price Type --

New Custom Home in the gated community of Vasaro. Home is fully completed and move in ready! 5 large bedrooms, all with in suite bathroom access, separate office, formal dining, large bonus room with a barn door, expansive open great room/kitchen plan w/walk in pantry, custom cabinets, large 3 bowl sink, built-in stainless-steel appliances, 48''refrigerator, commercial style range & hood, tile & wood flooring, 10x16 disappearing wall of glass, this home boast 12' & 15' ceilings and a large 4 car garage, meet with our pool & landscaping contractor and design your own custom backyard oasis. Owner is an agent in arizona

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11999 N 119th Street Scottsdale, AZ 85259

$2,475,000

4 Beds

4.5 Baths

5,059 SqFt

Status Active

MLS # 6733889

Property Type Single Family Residence

Price Type --

Welcome to the wonderful lifestyle of Ancala Country Club! This gorgeous property is an entertainer's dream! The inviting front courtyard with stone fireplace welcomes you into the expansive open concept great room with wet bar! A multi-slide door opens to the stunning infinity-edge swimming pool - perfect for indoor-outdoor entertaining. The kitchen is handsomely appointed with knotty alder cabinets, granite counter tops, 6 burner gas cooktop, double ovens, two dishwashers breakfast bar + breakfast nook. The grand formal dining room is where you'll have special celebrations! Private primary suite with tray ceilings, huge custom closet, bath with soaking tub and stone shower. Guests will enjoy the attached casita, or two additional ensuite guest rooms. The office/bonus room has charming front courtyard. The property boasts a total of 3 fireplaces. Step outside to the private low maintenance backyard oasis with pool, spa, expansive covered patios, built-in kitchen and faux grass. All this, and country club amenities, including manned guard gate, golf course, tennis courts, fitness room, kids park, club house and community pool (use of clubhouse, pools, tennis courts, fitness room, and golf course require club membership). WELCOME HOME!

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2928 N 83rd Street Scottsdale, AZ 85251

$2,475,000

4 Beds

5 Baths

3,572 SqFt

Status Active

MLS # 6760146

Property Type Single Family Residence

Price Type --

Stunning ''New Construction'' in a fabulous location just minutes to the shops, restaurants & night life in Old Town Scottsdale! This contemporary masterpiece features 16 foot soaring ceilings, 19 seer, 5 ton, variable speed HVAC, huge sliding glass patio doors, skylights, 3 gas fireplaces, 3 car garage w/electric vehicle charging station, RV Gate & RV Parking, NO HOA, tankless hot water heater, pool w/heater & chilling functions, Wellness Room w/cold plunge, exterior built in BBQ, synthetic grass. Over a 1/4 acre lot, home is all on 1 level with over 3,500 sq ft of interior living space, 4 total bedrooms (2 master suites), 5 baths, separate den/office, wet bar, built in wine refrigerator, 48''gas cooktop (Monogram Appliances) & kitchen island. Wired and plumbed for optional Guest House!

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1583 S 155th Street Gilbert, AZ 85296

$2,457,000

6 Beds

6.5 Baths

3,856 SqFt

Status Active

MLS # 6769989

Property Type Single Family Residence

Price Type --

Be Prepare to be amazed! Check out this newly Custom-built home w/ 6 beds, 6.5 bath now on the market! Stunning curb appeal, 4 garage spaces w/epoxy flooring & an attic, 170ft PVT Driveway and a RV gate. Discover spacious dining & living areas w/elegant wood-look flooring, high ceilings w/exposed wood beams & wood floors. upgraded ceilings fans, and neutral palette throughout. The gourmet kitchen is equipped w/Thermador Appliances the aspiring chef needs, white cabinetry w/crown molding, quartz counters, a farmhouse sink, and a prep island complete w/a breakfast bar. The primary bedroom showcases private outdoor access and a lavish ensuite w/dual vanity, Private access to a full Disability bedroom w/ full bath. Anderson windows & Trane A/C units. Large bonus room is ideal for an entertainment center or lounge area! Laundry room offers tons of additional cabinetry and a convenient utility sink. Lastly, the expansive backyard w/its extended covered patio, is a blank canvas w/more than enough space for a pool or guest house! This is the opportunity of a lifetime, don't let it slip by!

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3011 E Morrison Ranch Parkway Gilbert, AZ 85296

$2,455,000

5 Beds

4.5 Baths

4,015 SqFt

Status Active

MLS # 6772744

Property Type Single Family Residence

Price Type --

Welcome to this stunning 5-bedroom + loft + den + office, 4.5-bath residence in the highly sought-after Morrison Ranch Community, located on the tree lined street of Higley Estates. Set on a rare residential acre of land at nearly a full acre. This home combines luxury and functionality with expansive resort style outdoor living. Inside, the layout offers flexibility and space, including a main-level bedroom with an en-suite bathroom, perfect for guests or multigenerational living. The gourmet kitchen is a chef's dream, featuring a spacious island with 2-way cabinetry, double ovens, gas cooktop and a butler's pantry that opens to a large dining room. The impressive laundry room has custom cabinetry, a built-in sonic ice maker, and extensive storage for convenience. The master bathroom offers expansive elbow room and luxury finishes Throughout the home, enjoy smart technology, enabling remote control of the security system... garage, pool, and A/C, plus the added convenience of a central vacuum system and integrated security features. The backyard oasis is a true highlight with a heated pool and spa that offer vast features including a portable safety fence, travertine and an outdoor shower, misters, waterfalls, and a pergola complete with a wood-burning/gas fireplace for cozy gatherings. Enjoy a chicken coop and garden, each with self-watering systems, a sport court with a remote lighting system, a dedicated area for an in-ground trampoline, and a built-in BBQ setup with a side burner, sink, and fridge. Bistro light poles for entertaining, with mature landscaping, and a mix of faux turf and seeded grass adds to the ambiance, along with an abundance of citrus and fruit trees. Parking and storage are plentiful, with a 2.5-car garage featuring a mini-split for comfort, custom cabinetry, overhead shelving, and an additional side carport area tucked behind the RV gate. This home offers an exceptional blend of spacious interior living, an outdoor retreat, and smart home technology designed for modern convenience, with far too many features to list. Don't miss buying a home on one of the largest lots on the iconic Morrison Ranch Parkway in the heart of Gilbert AZ!!!

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6922 E 1st Street Scottsdale, AZ 85251

$2,450,000

2 Beds

2.5 Baths

2,638 SqFt

Status Active

MLS # 6657708

Property Type Townhouse

Price Type --

Nestled in Arizona's most sought-after city, The NINES are a new collection of residences in Old Town Scottsdale brought to you by Two Hawks Design and Development. This custom home offers 2,638 SF of living space, 2 bed (3rd bedroom option available), 2.5 bath, loft a 2-car garage, and NO HOA FEES!!! Sleek modern architecture opens to three light-filled levels of refined interior luxury. This home offers expansive windows, a private backyard, a rooftop terrace, 2 additional outdoor patios, and bespoke details and finishes. This custom contemporary home invokes a simple refined style of living with unbeatable proximity to Scottsdale's premier lifestyle amenities. Discover fine dining, high end retail, and the Scottsdale Arts District just steps from your door.

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6930 E 1st Street Scottsdale, AZ 85251

$2,450,000

2 Beds

2.5 Baths

2,638 SqFt

Status Active

MLS # 6657702

Property Type Townhouse

Price Type --

Nestled in Arizona's most sought-after city, The NINES are a new collection of residences in Old Town Scottsdale brought to you by Two Hawks Design and Development. This custom home offers 2,638 SF of living space, 2 bed (3rd bedroom upgrade option available), 2.5 bath, Loft, a 2-car garage, and NO HOA FEES!!! Sleek modern architecture opens to three light-filled levels of refined interior luxury. This home offers expansive windows, a private backyard, a rooftop terrace, 2 additional outdoor patios, and bespoke details and finishes. This custom contemporary home invokes a simple refined style of living with unbeatable proximity to Scottsdale's premier lifestyle amenities. Discover fine dining, high end retail, and the Scottsdale Arts District just steps from your door.

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9917 E Filaree Lane Scottsdale, AZ 85262

$2,450,000

3 Beds

3 Baths

3,800 SqFt

Status Active

MLS # 6683190

Property Type Single Family Residence

Price Type --

Discover luxury in this beautifully remodeled contemporary home, set amidst pristine grounds. Remodel recently completed by The Phil Nichols Company. All new appliances, fixtures, plumbing and roof. Custom architectural details enhance its elegance, while south-facing patios with extensive glass invite natural light and offer views of the resort-like backyard. The open floor plan, high ceilings, and modern finishes create a refined living space. The kitchen features state-of-the-art appliances and custom cabinetry. The master suite is a private sanctuary with a spa-like bathroom and ample closet space. Additional bedrooms offer comfort and privacy. This home is a testament to design and craftsmanship, providing a perfect blend of style and luxury. No Membership Available with this home.

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39115 N 99th Place Scottsdale, AZ 85262

$2,450,000

3 Beds

3.5 Baths

2,960 SqFt

Status Active

MLS # 6755921

Property Type Single Family Residence

Price Type --

Completely remodeled stand-alone home, situated on a corner lot with stunning mountain views and picturesque sunrises and sunsets. This home offers the luxury of a Five-Star resort, featuring beautiful wood floors throughout, sleek modern cabinetry in the kitchen and bar area (with a wine fridge), quartzite waterfall countertops, and an elegant backsplash. The primary bathroom is designed for a spa-like experience, with a freestanding tub and newly installed windows. The inviting patio, complete with a pebble tech spa and gas barbecue, provides the perfect space to unwind after a busy day. The home also includes a two-car garage with epoxy flooring and new patio railings. Home is being offered turnkey with gorgeous artwork.

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4549 E Marion Way Phoenix, AZ 85018

$2,450,000

4 Beds

2 Baths

2,650 SqFt

Status Active

MLS # 6778240

Property Type Single Family Residence

Price Type --

4549 East Marion Way in the idyllic neighborhood of Arcadia and on the west face of Camelback Mountain offers four bedrooms and two bathrooms. Beautiful, open, and light-filled; this carbon-negative home was sustainably remodeled in 2010. Featuring seller owned solar panels, Low E windows, energy star appliances, low allergenic American Clay wall treatment, and natural stone and tile flooring throughout. Outside is a desert oasis and bird refuge with a multi-zone, automated drip system to maintain mature desert landscaping. Enjoy year-round, spectacular sunset views and the downtown Phoenix skyline, as well as sightings a variety of rare birds, including rosy-faced lovebirds and great horned owls. Served by quality schools, Hopi Elementary and Arcadia High, this home is within an easy walk to neighborhood hotspots like the Global Ambassador Hotel and Steak 44 dining; you cannot live in a better location. Also within walking distance is The Village at Camelback with all of its offerings, including tennis, pickleball, swimming, and fitness. The Echo Canyon Trail of iconic Camelback Mountain is in your backyard, as are miles of hiking and biking trails along the Arizona Canal System. Don't miss out on this rare opportunity to go green and own a peaceful and healing mountain retreat.

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