First-Time Home Buyer Guide: Key Real Estate & Mortgage Terms You Need to Know

Are you a first-time home buyer overwhelmed by real estate and lending jargon? As your local agent on the Destin & Emerald Coast, I’m here to demystify the process so you can buy with confidence.

1. Pre‑Qualification vs. Pre‑Approval
Pre‑Qualification gives an informal estimate based on self‑reported income, assets, and debts.

Pre‑Approval involves verifying your credit, income, and debts—and delivers a conditional loan commitment. It shows sellers you’re a serious buyer.

2. Down Payment Options
Your down payment—the portion of the purchase price you pay upfront—can be as little as:

3.5% (FHA loans)

3% (select Conventional programs)

0% (VA loans) for eligible veterans, active‑duty service members, and certain spouses

0% (USDA loans) for properties in designated rural/suburban areas with income and location eligibility

Tip: Talk with a local mortgage lender to find the best program for you.

3. Earnest Money Deposit (EMD)
A “good faith” deposit—1–3% of purchase price—held in escrow. Your EMD applies toward your cash to close, lowering what you pay at settlement.

4. Escrow
A neutral third party holds funds and documents until closing. An escrow account may also collect and pay your property taxes and insurance.

5. Interest Rate vs. APR
Interest Rate: Annual cost percentage on your loan balance.

APR: Rate plus lender fees and finance charges—your loan’s true annual cost.

6. Common Loan Types
Conventional Loans – Best with strong credit.

FHA Loans – Backed by HUD; lower credit/down payment requirements.

VA Loans – No down payment or PMI for qualified military buyers.

USDA Loans – 100% financing in eligible rural/suburban areas.

7. Debt‑to‑Income Ratio (DTI)
Your monthly debts ÷ gross income. Aim for below 43% to satisfy most lenders.

8. Inspections, Survey & Appraisal
Home Inspection (optional but highly recommended; paid upfront)

4‑Point (roof, electrical, plumbing, HVAC)

Wind Mitigation (insurance premium reduction)

WDO (required for VA loans; wood rot, termite/pest check)

Foundation (structural engineer or licensed foundation inspector)

Well Water Testing (safety & lender requirement)

Land Survey (upfront cost)

Confirms property lines, easements, and encroachments—often required by lender/title.

Home Appraisal

Lender‑ordered verification of fair market value—protects both you and the lender.

9. Closing Costs
2–6% of purchase price covering lender fees, title insurance, escrow, appraisal, etc. Sellers may credit toward them in some markets.

10. Title Insurance
A one‑time fee protecting you and your lender from future title defects or claims.

11. Buyer’s Agent Compensation
Commission: Negotiated with the seller; not set by law.

Responsibility: If the seller doesn’t pay the agreed amount, you cover the difference.

Agreement: Always clarify your agent’s fee in writing before proceeding.

Ready to Buy?
Whether you’re eyeing a beach condo or a waterfront home in Destin or the surrounding areas, understanding these terms empowers you to make smart decisions.
💬 Contact me for a free consultation—let’s turn your first‑time home buying dream into reality!