By DoorFly.com

Do you wish that someone would break-down the process of buying your first home in plain English? Well, one of the best ways we know to do this is presented right here. We will attempt to walk you through the basics of what you need to know as a first time home buyer. This won’t make you a real estate pro, but it will allow you to be able to hold a good conversation with a quality REALTOR. So on with the show… Here are the ABC’s for first time home buyers:

 A - Adjustable Rate Mortgage
      This is a type of mortgage which generally starts off with a low interest rate and then gets adjusted every year based upon a defined index. These can be both good and evil in that they keep payments low initially but can quickly spiral out of control. If you are considering an ARM, you might want to plan to refinance if you see interest rates start to rise.

B - Buyer’s Market
      It’s always good to pay attention to whether or not you are in a buyers or sellers market. When demand for homes is low and the inventory of houses is high you are generally in a buyer’s market. This is a great time to make your move and get your first home.

C - Closing
      The closing that everyone is referring to is that final day of reckoning when you sign the loan papers and the title transfers over into your name. This is closely tied to closing costs another important “C” term to know as it defines the amount of money you have to bring to the closing.

D - Down Payment
      Most of us are familiar with the term down payment. This is the amount of money that you put down on the house when you apply for the mortgage. The more you put down, the less you have to get a loan for. If you put too little down then you may have to get mortgage insurance (see PMI below).

E - Escrow
      This is an amount of money that is held by a third party until both the buyer and seller have come to terms and have reached the release of the escrow. An example is the earnest money that you provide when you make an offer on a home. That is held in escrow usually until the closing occurs (sometimes it is released earlier).

F - Funding
      The funding generally happens behind the scenes unless you are buying your first home with cash. This is when the mortgage company actually funds the loan on your behalf (pays the seller or the seller’s bank).

G - Government Loans and Grants
      The government is generally very helpful to first time home buyers offering various first time home buyers grants and special loans from various departments (FHA, DVA, etc.). You should be sure to explore all types of Federal aid with your REALTOR and lender.

H - Homeowner’s Associations
      If you are buying a home in a planned community it is very likely that they will have a homeowner’s association that has covenants or restrictions that tell you what you can and can’t do with the home. For instance, you may have to get the approval of the HOA to remove or plant trees, build a fence, etc.

I - Insurance
      You will need to invest in a good homeowners insurance policy. There are many different insurance brokers out there and most will also give you a discount if you insure an automobile as well with them. Be sure to check out all of your options and also that your lender will accept insurance from that broker.

J - Judgement
      You need to be aware of any judgements agains the home that you are buying. This basically means that the previous owner failed to pay a contractor or another party and that a court put a judgement on the home that needs to be cleared (aka paid) before the home can be sold to you.

K - Kickbacks
      Well call it what you want but there are several people along the way of you buying a home that need to get a few bucks in their pocket. It’s all legal, but it doesn’t make it any less of a kickback.

L - Legal Description
      The legal description of a home is something you generally would not recognize. It is not the address but dates back to the days when settlers were settling on the land for the first time and the government divided up the tracts of land all the way down into lots and sub-lots.   

M - Mortgage
      The American dream of owning a home is generally accompanied by a big fat loan from a mortgage company. These are normal but you do want to try and keep the payment under 30% of your monthly income (the lower the better of course).

N - No Points Loan
      The lender may require you to pay some “points” in order to lock you in at a specific rate. If you go for a no points loan you generally just end up with a slightly higher interest rate (make sure you check the option out).

O - Origination Fee
      The origination fee on a loan is basically the number of points a person has to pay to get a loan. On a government based loan the origination fee is generally 1%. Basically, this results in just more money that you have to bring to the closing.

P - Private Mortgage Insurance
      Generally if the loan-to-value ratio is 80% or higher your lender will require you to purchase private mortgage insurance. This is one of the reasons why you often hear people say that you should put down 20% or more on the house. If you can’t, don’t worry that is what PMI was created to solve.

Q - Quitclaim Deed
      This is just a really simple way to convey the interest in a title to another party. The person signing the quit claim deed no longer has an interest in the title once the deed is filed and recorded.

R - Recording Fees
      Several of the many, many papers you sign at the time of closing have to be sent to various governmental agencies to be filed. Generally these each require a fee for processing which is also called a recording fee.

S - Survey
      One thing that is required as a part of the process of buying a home is making sure you have a current survey which just makes sure that the legal description and what is on record is correct among other things.

T - Title Insurance

In order to make sure that the seller has a clean title to convey, it is generally required for you to get title insurance or in the State of Iowa the abstract has to be made current to make sure the title is clean.

U - Underwriting
      Underwriting is a normal part of the lending process where your credit and various other aspects associated with the deal are analyzed by people in the mortgage company to determine if they want to loan you the money.

V - VA Mortgage
      If you are a veteran of the U.S. armed forces then you should make sure to take advantage of the various benefits like the Department of Veterans Affairs guaranteeing your loan.

W - Walkthrough
      Especially if you are buying a new home but even a pre-existing home generally the buyer requires a walkthrough (inspection) of the home before closing.

X - X-terminate
      Okay, X is a rough letter but it is important to make sure you check for pests and get the home exterminated before you move your stuff into it. An empty home is much easier to exterminate.

Y - Yards
      You should make sure that the yardwork is kept up on the house that you are buying and that none of the neighbors are encroaching onto the land.

Z - Zoning
      There are several zoning considerations that you need to keep in mind when buying a home and that a lender will consider as well as the appraiser. If the adjacent property is zoned to be commercial or multi-family for instance, it can impact the value of your property.