Family excited about their new mortgage

Understanding Mortgages: An In-depth Look at Home Financing

What is a Mortgage?

A mortgage is a type of loan designed specifically for purchasing property. When the cost of a home is too high to pay upfront, a financial institution like MPS steps in to lend the needed funds. This loan, along with an agreed-upon interest, is then paid back over a set period – the term of the mortgage.

Fixed-Rate vs Adjustable-Rate Mortgages

Mortgages primarily come in two forms: fixed-rate and adjustable-rate.

In a fixed-rate mortgage, the interest rate remains constant throughout the term. This means your monthly payments stay the same, providing financial predictability and stability. It’s an excellent option if you plan to live in your home for many years and appreciate knowing exactly what your payment will be each month.

Conversely, an adjustable-rate mortgage has an interest rate that can change over time. While the initial rate tends to be lower than a fixed-rate mortgage, it’s subject to increase or decrease based on market conditions. This could be a good choice if you anticipate moving before any potential rate increases.

The Importance of Down Payments and Mortgage Insurance

When buying a home, you’re typically required to make a down payment. This upfront payment can significantly impact your mortgage terms, including your interest rate and whether you’ll need to pay for mortgage insurance.

Mortgage insurance is often required when the down payment is less than 20% of the home’s purchase price. It protects the lender if the borrower fails to repay the loan. Understanding these aspects can help you plan better for your home purchase.

Principal, Interest, Taxes, And Insurance (PITI)

Your monthly mortgage payment often goes beyond simply repaying the loan and its interest. Most homeowners also pay towards their property taxes and homeowner’s insurance as part of their payment. Collectively, these components are known as PITI and understanding them can provide a clearer picture of your total monthly expenditure.

The Role of Credit Scores in Mortgage Approval

Your credit score plays a critical role in the mortgage approval process. Lenders use it to determine your creditworthiness and the likelihood of you repaying the loan. A higher credit score can lead to more favorable mortgage terms.


Taking out a mortgage is a significant financial decision that requires careful thought and understanding. Here at MPS, we believe knowledge is power. The more you understand about mortgages, the better equipped you’ll be to make informed decisions on your journey to homeownership.

Remember, at MPS, we’re with you every step of the way, ready to help make your dream home a reality.