Real Estate Jargon Buster

In Plain English: Your mortgage has an interest rate (say, 7%) and fees (origination, points, etc.). The APR combines both into one number so you can compare loans fairly. A 7% rate with $5,000 in fees might have a 7.2% APR. Lower APR = better deal overall.

In Plain English: Early in your mortgage, most of your payment goes to interest. Very little goes to the principal (actual loan). As years pass, this flips—more goes to principal, less to interest. By year 20, you're mostly paying down the loan itself. This is why paying extra toward principal early saves you so much.

In Plain English: Add up all your monthly debt payments: mortgage (including taxes/insurance), car loans, student loans, credit card minimums. Divide by your monthly income before taxes. Most lenders want this under 43%. Example: $3,000 in debts ÷ $7,000 income = 43% DTI.

In Plain English: This is "good faith money" that says "I'm for real." You typically write this check within 24-48 hours of offer acceptance. It's held in escrow and CREDITED toward your down payment at closing—it's not an extra cost. If you back out for a valid reason during option period, you get it back. If you back out for no reason after option period, the seller might keep it.

In Plain English: Two meanings: (1) The company that holds your earnest money and handles the closing paperwork. They're the neutral middleman making sure everything happens correctly. (2) Your mortgage payment includes extra money each month that goes into an "escrow account." Your lender uses this to pay your property taxes and homeowners insurance when they're due. You don't have to remember to pay them—your lender does it for you.

In Plain English: FHA doesn't lend you money—banks do. But FHA insures the loan, so banks are willing to approve buyers with lower credit scores and smaller down payments. The catch? You pay mortgage insurance (MIP) for the life of the loan. Still, for many first-time buyers with 580-700 credit scores, FHA is the easiest path to homeownership.

In Plain English: Many newer subdivisions in Texas (especially in suburbs) are in MUDs. The developer borrowed money to install water/sewer lines, and you pay it back through higher property taxes—usually 0.5-1.5% extra annually. This can add $200-500/month to your payment. ALWAYS ask "Is this property in a MUD?" before buying. It significantly affects affordability.

In Plain English: This is your "get out of jail free" period. You pay $100-500 for unrestricted termination rights. During these 7-10 days, you do your inspections. If you find foundation issues, terrible schools, noisy neighbors, or just get cold feet—you can walk away and get your earnest money back. After option period ends, backing out means losing earnest money unless you have a specific contingency (like appraisal or financing).

In Plain English: You're paying to insure the LENDER against you not paying. Feels unfair, but it's why they'll loan you money with only 5% down. Cost is usually 0.5-1% of loan annually ($150-300/month on a $370K loan). Good news: PMI goes away automatically when you reach 20% equity—either through paying down the loan or home appreciation. FHA's version (MIP) is permanent and only goes away if you refinance.

In Plain English: This is NOT the same as pre-qualification (which is just an estimate). Pre-approval means a lender pulled your credit, verified your income with pay stubs and tax returns, confirmed your down payment with bank statements, and gave you an official letter. Sellers take you seriously. Without this, you're just window shopping. In competitive markets, sellers won't even consider offers without pre-approval letters.

In Plain English: Before you close, a title company searches public records to make sure the seller actually owns the home and there are no hidden liens or claims. Title insurance protects you if they missed something. There are two policies: (1) Lender's title insurance (protects the bank, you pay for it, required), and (2) Owner's title insurance (protects you, optional but highly recommended). One-time fee at closing, covers you forever.

In Plain English: After your offer is accepted, your loan goes to an underwriter—a person who reviews EVERYTHING. They verify your pay stubs, call your employer, check bank statements, review the appraisal, and look for any red flags. They might ask for more documents (bank statement missing a page, explanation for large deposit, etc.). This is the most stressful part because they can deny your loan even after you're under contract. Don't make ANY financial changes during underwriting—no new jobs, no big purchases, no new credit cards.