Reference
Plain-English Glossary
Every mortgage, escrow, and Texas-specific real-estate term you'll hear - defined without jargon. Search or scan by category.
Financing
- APR (Annual Percentage Rate)
- Your rate plus most lender fees expressed as one number - the truer cost-comparison figure when shopping lenders.
- Amortization
- How each payment is split between interest and principal. Early payments are interest-heavy; the curve flips around year 18 on a 30-year.
- Buydown (2-1, 3-2-1)
- Lump sum at closing that temporarily lowers your rate. A 2-1 drops year 1 by 2% and year 2 by 1%; the rate snaps to note in year 3.
- Conventional loan
- A non-government-backed loan (Fannie/Freddie). 3% down available (HomeReady/Possible) up to 95% LTV.
- DTI (Debt-to-Income)
- Monthly debt obligations ÷ gross monthly income. Most loans cap around 43–50% back-end DTI.
- Escrow account
- Monthly account funded with your mortgage payment that pays property tax and insurance when due.
- FHA loan
- Government-insured loan with 3.5% down at 580+ credit. MIP for the life of the loan unless refinanced.
- LTV (Loan-to-Value)
- Loan amount ÷ home value. Drives PMI, rate pricing, and program eligibility.
- MIP
- Mortgage Insurance Premium - FHA's version of PMI. Upfront 1.75% + annual 0.55% (typical).
- PITI
- Principal + Interest + Taxes + Insurance - your true monthly housing cost.
- PMI
- Private Mortgage Insurance on conventional loans below 80% LTV. Drops automatically at 78%; can be requested at 80%.
- Points (Discount points)
- 1 point = 1% of the loan amount paid upfront to permanently lower the rate. Typically reduces rate by 0.20–0.25%.
- USDA loan
- 0%-down loan for qualifying rural/suburban areas with income caps. Check eligibility.sc.egov.usda.gov.
- VA loan
- 0%-down loan for veterans and eligible spouses. No PMI; one-time VA funding fee instead.
Programs
- AMI (Area Median Income)
- HUD-published income benchmark by county. Most DPA caps at 80%, 100%, or 140% AMI.
- DPA (Down Payment Assistance)
- Grant, forgivable loan, or second lien from a state, city, county, employer, or nonprofit.
- MCC (Mortgage Credit Certificate)
- Annual federal income tax credit equal to a % of mortgage interest (capped $2,000/yr in Texas).
- TDHCA
- Texas Department of Housing and Community Affairs - runs My First Texas Home / My Choice Texas Home DPA programs.
- TSAHC
- Texas State Affordable Housing Corporation - runs Home Sweet Texas and Homes for Texas Heroes DPA grants.
- VLB
- Texas Veterans Land Board. Stacks on VA loans for additional rate discounts and land/home loans.
Contract
- Earnest money
- Good-faith deposit (~1% of price in Texas) held by the title company, credited back at closing.
- Option fee / Option period
- Texas-specific paid right to terminate the contract for any reason during a short window (typically 5–10 days).
- Third-Party Financing Addendum
- TREC addendum (TXR 1901) that lets you terminate if financing falls through. The most important addendum after option period.
- Seller's Disclosure
- TREC-required notice of known property defects. Read it twice and ask questions.
- Concession
- Money the seller agrees to pay toward your closing costs, prepaids, or buydown - capped by loan type.
- Survey
- Property boundary map. Existing surveys (with T-47 affidavit) are often acceptable in Texas; new surveys run $450–$700.
Closing
- Loan Estimate (LE)
- 3-page disclosure delivered within 3 business days of application. The basis for comparing lenders.
- Closing Disclosure (CD)
- Final 5-page settlement statement. Must be delivered ≥3 business days before closing by federal law.
- Funding
- When the lender wires money and title records the deed. In Texas, closing = signing; funding = keys.
- Title insurance
- One-time premium protecting against ownership claims. Owner's policy is buyer's; lender's policy is lender's.
- Prepaids
- Property tax and insurance amounts collected at closing to seed your escrow account.
- Homestead exemption
- Texas: removes $100K of value from school district taxes on your primary residence. Apply with the county appraisal district by April 30.
People
- Buyer's agent
- Licensed agent representing you. Texas now requires a signed Buyer Representation Agreement before showings.
- Loan officer (LO)
- Takes your application and shepherds the loan. A mortgage broker shops multiple wholesale lenders.
- Underwriter
- Lender employee who reviews every document and issues the loan approval.
- Title officer / Escrow officer
- Handles closing, title insurance, and disburses funds. Independent of the lender.
- Appraiser
- Third-party licensed valuation expert hired by the lender to confirm the home is worth the loan.