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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1007 W Canyonlands Court San Tan Valley, AZ 85140

$469,000

4 Beds

3 Baths

2,443 SqFt

Status Active

MLS # 6694828

Property Type Single Family Residence

Price Type --

Welcome home! This highly desirable cul-de-sac, fabulous two-story abode is about to be yours! Once inside, you'll immediately notice the harmonious open floor plan graced with bountiful natural light and tile flooring. Spotless kitchen is equipped with plenty of espresso cabinets, recessed & pendant lighting, built-in appliances, a handy pantry, and a center island with a breakfast bar. Head upstairs to discover the sizable loft complemented by built in wraparound desk and a wall-mounted fireplace to keep you warm during cooler months. Romantic main bedroom includes plush carpet, an ensuite with dual sinks, and a walk-in closet. Finally, the generous-sized backyard with its covered patio, lovely gazebo, hot tub and artificial turf is the right spot for unwinding or gatherings. This gem is the one you're looking for!!

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13578 W Cypress Street Goodyear, AZ 85395

$469,000

3 Beds

2.5 Baths

2,024 SqFt

Status Active

MLS # 6696334

Property Type Single Family Residence

Price Type --

Experience luxury living in this 3-bedroom, 2.5-bathroom home nestled within a secured gated golf community. Step inside to discover an expansive floor plan adorned with ample natural light. The spacious living area offers comfort and elegance , perfect for entertaining guests or unwinding after a long day. Retreat to the primary suite boasting a lavish ensuite bathroom and generous closet space. Two additional bedrooms provide versatility for guests. A separate home office space is ready for you to use in the upstairs loft. Step outside to stunning golf course views in the backyard. With access to community amenities and the convenience of a gated environment, this property offers the epitome of upscale living.

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546 S 199th Drive Buckeye, AZ 85326

$469,000

4 Beds

3 Baths

2,151 SqFt

Status Active

MLS # 6687707

Property Type Single Family Residence

Price Type --

**SELLER CREDIT OF $12,000 TOWARD CLOSING COST OR BUY-DOWN RATE** *HOME WARRANTY* Fall in LOVE with this charming home in Blue Horizons! Offering 4 beds, 3 baths, 3-car tandem garage, & a well-manicured landscape. Discover an inviting interior that features a designer palette & wood-look tile flooring t/out. Ideal for those who love to entertain, this gem's open layout ensures seamless & enjoyable gatherings! Main bedroom has a tray ceiling, a walk-in closet, and an ensuite with dual sinks & a separate tub/shower. Versatile den can be an office or reading nook! There is also a storage room for added convenience. Outback, you have a covered patio, Gazebo, well-laid pavers, & artificial turf. Move-in ready

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37228 N Canter Street San Tan Valley, AZ 85140

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New

$469,000

4 Beds

3 Baths

2,027 SqFt

Status Active

MLS # 6702653

Property Type Single Family Residence

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Welcome to resort-style living in beautiful Archer Meadows in San Tan Valley! This fantastic gated community has all the amenities to keep you engaged, including a community pool, clubhouse w/gorgeous kitchen, outdoor lounge areas & grilling stations, cornhole, disc golf, workout facility & more. HOA allows RV parking, so come park your toys on this generous lot w/RV gate. Step inside this charming abode and be greeted by a spacious floor plan w/ one bedroom w/en suite bath just off the front door, perfect for a home office or out of town guests. The stylish kitchen is a chef's delight, featuring granite countertops, stainless steel appliances w/gas range, large island w/bar seating, and ample cabinet space for all your culinary needs. Relax and unwind in the calming master suite, w/ en-suite bathroom and a generous walk-in closet. Additional hall bedrooms share another bathroom, plus there's a flex room that's great for hang outs, playdates, jam sessions, whatever fits your needs. Outside, discover your own private oasis w/ lush artificial turf, offering a low-maintenance yet picturesque landscape all year round. Embrace the Arizona sun and reduce your carbon footprint with the rooftop solar panels, providing sustainable energy solutions and significant savings on utility bills. Secure your private time today!

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11437 N Coggins Drive Sun City, AZ 85351

Open House

New

$469,000

3 Beds

2.5 Baths

1,766 SqFt

Status Active

MLS # 6702382

Property Type Single Family Residence

Price Type --

SPECTACULAR remodeled home on the golf course**Come see what your dream home feels like! This beauty offers a spacious open floorplan with exquisite design and modern upgrades throughout in the heart of Sun City 55+ community. Meticulously updated offering the perfect blend of style and functionality. Whether you enjoy relaxing indoors or entertaining guests outdoors, this home has it all.**Key Features are-Chef-sized kitchen with new cabinets galore-New sleek appliances-Oversized kitchen island for meal prep and casual dining-Custom pergola back patio overlooking the golf course-Primary bedroom offers a large walk-in closet for ample storage and luxurious walk-in shower and modern bathtub for a spa-like experience in the primary bathroom-Convenient laundry room inside the home-Updated fixtures and finishes throughout give you a complete contemporary look. New roof for peace of mind and great curb appeal-Serene views of the golf course and surrounding greenery. Don't miss this opportunity to own a piece of paradise in Sun City. See it today and make this beautifully remodeled home yours!

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13128 W Avenida Del Rey -- Peoria, AZ 85383

Open House

$469,000

3 Beds

2 Baths

2,213 SqFt

Status Active

MLS # 6678584

Property Type Single Family Residence

Price Type --

Gorgeous former model home, clean and move in ready! Upgraded carpet and tile flooring. Kitchen is equipped with granite countertops , large island, gas range, pantry, and extended cabinetry. Living/formal room and Office! Split floor plan, large Primary suite and 3 car Tandem Garage. Refrigerator, washer and dryer convey. Large covered patio and beautifully landscaped front and backyard with great Privacy.

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13022 W Castlebar Drive Sun City West, AZ 85375

Open House

$469,000

2 Beds

2 Baths

1,953 SqFt

Status Active

MLS # 6682344

Property Type Single Family Residence

Price Type --

Price Reduced to $469,000!!! This updated home is located on a scenic double fairway of Briarwood Golf Course in the low-tax area. The backyard features a covered patio - perfect for enjoying a sunrise and coffee while watching golfers at play. The kitchen offers multiple dining options including a breakfast bar and an eat-in area with golf course views. You will notice newer appliances, cabinets, and countertops. The master suite has double sinks, a newly tiled shower, and a spacious walk-in closet. Recent renovations: knockdown ceilings, fresh paint, newer carpet in the bedrooms, interior doors, modern light fixtures and ceiling fans, new bathroom vanity tops, sinks, faucets, and stunning tiled showers. The large laundry room is a potential office space with existing cabinets in place Sun City West, Arizona, is renowned for its extensive range of amenities tailored to active adults, offering a variety of recreational centers each with its unique facilities. Here's a summary of the amenities provided by each of the main recreation centers in Sun City West: 1. R.H. Johnson Recreation Center Social Hall: A hub for community gatherings and events. Swimming Pools: An outdoor pool with a lazy river walking path, water aerobics, volleyball, and lap swimming. Fitness Center: Equipped with modern exercise equipment. Tennis Courts: Several courts for tennis enthusiasts. Racquetball Courts: For those who enjoy a fast-paced indoor sport. Pickleball Courts: A growing favorite among residents. Miniature Golf: A fun, leisurely activity for all ages. Outdoor Amphitheater: Hosts concerts and other outdoor performances. Arts and Crafts Clubs: Facilities for ceramics, woodworking, stained glass, and more. Library: A wide selection of books and reading areas. Bowling Alleys: Modern facilities for bowling enthusiasts. Outdoor Courts: Bocce ball, Lawn Bowling Dog Parks: A large and small dog park. 2. Palm Ridge Recreation Center Swimming Pools: Features both indoor and outdoor pools. Fitness Center: Well-equipped for various workouts. Tennis Courts: High-quality courts for players. Pickleball Courts: Multiple courts to accommodate the popular sport. Club Rooms: Spaces for clubs and group meetings. 3. Beardsley Recreation Center Swimming Pool: A beautiful outdoor pool for laps and leisure. Fitness Center: Offers a range of exercise equipment. Club Rooms: Available for various club meetings and activities. Miniature Golf Course: Adds a touch of fun with a challenging layout. Arts and Crafts: Facilities for creative pursuits like pottery and fine arts. 4. Kuentz Recreation Center Swimming Pool: An inviting outdoor pool for residents. Fitness Center: Keeps residents active with a variety of equipment. Tennis Courts: For both casual and competitive play. Softball Field: A well-maintained field for games and tournaments. Arts and Crafts: Including woodworking and painting studios. Stardust Theatre: A venue for plays, musicals, and other performances. Outdoor Courts: Bocce ball, cornhole, and horseshoe pits Additional Facilities Across the Centers: Golf Courses: Sun City West has seven beautifully maintained golf courses. Clubs: Over 100 Clubs including Woodworking, Auto Restoration, Metal Shop Walking Tracks: Scenic paths for leisurely strolls or brisk walks.

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13256 N 38th Place Phoenix, AZ 85032

$468,999

3 Beds

2 Baths

1,240 SqFt

Status Active

MLS # 6643265

Property Type Single Family Residence

Price Type --

Welcome to this breathtakingly remodeled home, a true gem that blends modern luxury with unparalleled convenience. Situated just a mile east of SR 51, this home offers swift access to major roads and urban amenities. A short stroll down the street leads to the lush expanses of Indian Bend Park, providing a perfect setting for outdoor recreation and relaxation. Perfect for New Beginnings. This home isn't just a residence; it's a lifestyle choice. Whether you're looking for a peaceful family haven or a vibrant social hub, this property caters to all. It is the perfect way to start your new year in style.

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18755 E Elizar Drive Gold Canyon, AZ 85118

$468,995

3 Beds

2.5 Baths

2,070 SqFt

Status Active

MLS # 6695197

Property Type Single Family Residence

Price Type --

Entrada del Oro in the Superstition Mountains: A serene desert escape with breathtaking, rugged beauty. Perfect for sunrise and sunset admirers.

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40258 W Michaels Drive Maricopa, AZ 85138

$468,995

4 Beds

2 Baths

2,370 SqFt

Status Active

MLS # 6695514

Property Type Single Family Residence

Price Type --

You'll find plenty to love about the Raleigh plan! The center of the home boasts a large gourmet kitchen with a convenient center island and walk-in pantry, which flows into an open-concept dining room and great room. The owner's suite is adjacent, with a private bath and a walk-in closet. There are three additional bedrooms and a bath off the great room and off the entry is a private study. Outside, enjoy your corner lot and large covered patio!

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18740 E Elizar Drive Gold Canyon, AZ 85118

$468,995

3 Beds

2.5 Baths

1,930 SqFt

Status Active

MLS # 6679862

Property Type Single Family Residence

Price Type --

Entrada Del Oro..... Entrance to Gold! Charming 3BR/2.5BA home! The back yard offers picture perfect views of Superstition Mountains and is the ideal place to enjoy evening sunsets. Beautiful Laminate flooring throughout with carpet in the bedrooms, kitchen comes with GE kitchen appliances & Quartz counter tops, two tone interior paint. The front yard comes desert landscaped and driveway is complete with pavers, make this home yours today!

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19551 W Cambridge Avenue Buckeye, AZ 85396

$468,995

4 Beds

3 Baths

2,070 SqFt

Status Active

MLS # 6688597

Property Type Single Family Residence

Price Type --

Explore this thoughtfully designed Slate home, ready for quick move-in on a homesite boasting front yard landscaping and driveway pavers. Included features: an inviting covered entry; an impressive kitchen layout offering 42'' cabinets, stainless-steel appliances, quartz countertops, a center island and a roomy pantry; an open dining area; a spacious great room; a lavish primary suite showcasing a generous walk-in closet and a private bath with cultured marble countertops; a convenient laundry; a covered patio and a 2-car garage. This home also offers stone tile flooring, additional windows and ceiling fan prewiring in select rooms.

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