Glossary of Terms

Definitions and explanations of Texas title insurance, real estate, and closing terminology. Browse by letter or scroll to find the term you need.

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A B C D E F G H L M N O P R S T V W

A

Abstract of Title: A condensed history of the title to a parcel of real property, showing all recorded documents affecting the title.
Abstract Plant: A geographically arranged, current set of public records adequate for insuring titles. Title insurance agents and direct operations in Texas must maintain an abstract plant for each county where they have an office.
Ad Valorem Tax: A tax based on the assessed value of property. In Texas, ad valorem taxes are levied by counties, school districts, and other taxing authorities.
Adjustable Rate Mortgage (ARM): A home loan with an interest rate that can change periodically. Monthly payments can go up or down. The initial rate is typically lower than a fixed-rate mortgage. At the end of the initial period, the rate adjusts and your payment may change.
Amortization: The repayment schedule of a loan, including principal and interest. An amortization schedule shows the amount of principal and interest in each payment and the remaining loan balance.
Annual Percentage Rate (APR): The borrower's cost of the loan expressed as a rate, including fees. This is not the same as the interest rate.
Appraisal: The estimated value of a property based on a qualified appraiser's written analysis. Lenders typically require appraisals before issuing loans to ensure the property value supports the sales price and loan amount.
Appreciation: The increased value of your home from when you purchased it. Equity often grows as a result of appreciation and paying down your mortgage.
Assessed Value: The dollar value that the county appraisal district assigns to your property for tax purposes. This value may differ from appraised or market value.

B

Buyer's Agent: A real estate agent who represents the interests of homebuyers.

C

Chain of Title: The sequence of historical transfers of title to a parcel of property, from the original grant to the present owner.
Closing: The final step in a real estate transaction when the deed is delivered, funds are disbursed, and the title is transferred to the buyer.
Closing Costs: Miscellaneous expenses typically paid by the buyer to close the deal, including mortgage fees, recording fees, title insurance, credit check fees, commissions, inspection fees, appraisal fees, and more.
Closing Disclosure: A final accounting of your loan's interest rate and fees, mortgage closing costs, monthly payment, and total payments. It also states the amount the buyer must bring to closing. Replaces the former HUD-1 and final TIL for most residential loans (TRID).
Closing the Transaction: The investigation made by the title company before issuing the policy to verify proper execution, acknowledgment, and delivery of all conveyances and loan documents; that delinquent taxes are paid, current taxes prorated, consideration has passed, proceeds disbursed, a final title search has been done, and documents are filed for record.
Commitment: See Title Commitment.
Common Area: Shared spaces in a condo or townhome, such as pools, parking, laundry, hallways, driveways, or courtyards.
Comparables: Properties used as a comparison in determining the current value of a property being appraised. Also known as "comps."
Comparative Market Analysis (CMA): A report that looks at similar homes in your area that were sold or are on the market, helping determine an accurate value for your home.
Consummation: The point when the consumer becomes contractually obligated on the loan to the creditor. Distinct from closing or settlement; timing depends on state law.
Contingencies: Conditions that must be met before closing, such as a home inspection, financing contingency (releasing the buyer if the loan falls through), or a contingency that the buyer must first sell their current home.
Counteroffer: A revised offer made by the seller in response to the buyer's initial offer. Used when the seller rejects or wants to modify the original terms.
County Appraisal District (CAD): The local government agency that appraises property for tax purposes. In Texas, homeowners apply for exemptions through their county appraisal district.

D

Deed of Trust: In Texas, the security instrument that creates a lien on real property to secure repayment of a loan. The borrower conveys title to a trustee for the benefit of the lender.
Direct Operation: A title insurance company's own branch offices that conduct title business under a license, as opposed to independent title agents. In Texas, "title insurance agent" is often construed to include direct operations.

E

Earnest Money: Money the buyer deposits with the title company or seller as a good-faith gesture that they are serious about buying the home.
Easement: A right to use another's property for a specific purpose, such as access, utilities, or drainage. Easements may be appurtenant (benefiting adjacent land) or in gross.
eClosing: A closing where some or all documents are signed or notarized electronically. Types include hybrid (mix of electronic and paper), in-person electronic (IPeN), and remote online notarization (RON).
Effective Date: The date the buyer and seller have agreed to all terms and executed the contract.
Encumbrance: Any claim, lien, or liability that affects or limits the title to property. Liens, easements, and restrictive covenants are common encumbrances.
Endorsement: An amendment or addition to a title insurance policy that expands, restricts, or clarifies coverage. Endorsements address specific title issues.
Equity: The value in your home above the total amount of outstanding liens. Example: if you owe $100,000 but the home is worth $130,000, you have $30,000 in equity.
eRecording: Recording a document in the public records by submitting it to the county recorder in digital form, rather than delivering a paper document.
Escrow: A legal arrangement in which a third party temporarily holds money or assets until a condition is met, such as the fulfillment of a purchase agreement.
Escrow Officer: An attorney or employee of a title insurance agent or direct operation who may countersign title forms, supervise preparation and delivery of title forms, sign escrow checks, or close the transaction.
Escrow Reserves: Funds collected as part of the monthly mortgage payment and held by the mortgage company for property taxes and homeowners insurance.
eSignature: An electronic symbol or process applied to a digital document with intent to sign, in place of a traditional ink signature.
Executed: When a legal document has been agreed upon and signed by all parties.

F

Fee Simple: The highest form of ownership in real property, giving the owner full rights to use, possess, and dispose of the property.
Final Walk-Through: The last walk-through of the home before closing, after any inspections and agreed-upon repairs are complete.
Finance Charge: The total dollar amount the loan will cost the consumer, including interest and certain fees.
Fixed-Rate Mortgage: A loan with a fixed interest rate and payment for the duration of the loan. Traditionally 30 years but can be 15, 10, or another term.
Fixtures: Items permanently attached to or built into the property. Fixtures typically stay with the property when sold unless the contract excludes them.
Form 1099-S: IRS form that reports the seller's proceeds from a real estate sale or transfer. The title company typically prepares and files this form at closing.

G

Grantor's Affidavit of Title: A sworn statement signed by the seller at closing affirming that they hold good title and that certain representations about the property are true.

H

Home Inspection: A professional examination of the structural and mechanical condition of a property (plumbing, foundation, roof, electrical, HVAC, etc.) to identify problems before purchase. Pest and pool inspections are also common.
Home Warranty: Limited warranty coverage on items in the home that can be costly to repair, such as HVAC, appliances, and pest control. Coverage varies by policy. Sellers may provide a credit toward a home warranty if agreed in the contract.
Homeowner's Insurance: Insurance that covers losses and damages to a residence, furnishings, and other assets in the home.
Homeowners Association (HOA) Resale Certificate: A document issued by a property owners or condo association outlining fees associated with the transfer of the property, collected from buyer and seller at closing.
Homestead Exemption: A property tax exemption available to Texas homeowners that reduces the taxable value of their primary residence. Must be filed with the County Appraisal District.
HUD-1 Settlement Statement: Former itemized statement of fees and charges paid by buyer and seller at closing. Replaced by the Closing Disclosure for most residential loans subject to TRID.

L

Lender's Policy: Title insurance that protects the mortgage lender's security interest in the property. Required by most lenders as a condition of the loan. See Loan Policy.
Lender's Underwriting: The process used to determine loan approval, evaluating the property and the borrower's credit and ability to pay the mortgage.
Lien: A legal claim or charge against property that secures payment of a debt or obligation. Common liens include mortgages, tax liens, judgment liens, and mechanic's liens.
Loan Approval: The lender agrees to make the loan after reviewing the buyer's income and credit history and confirming the property appraised for at least the sales price.
Loan Estimate: A form that discloses estimated loan terms and closing costs. Lenders must provide it within three business days of receiving a loan application. Replaces the former Good Faith Estimate (GFE) for most residential loans (TRID).
Loan Policy: Title insurance that protects the lender's lien. In Texas, Form T-2 (Loan Policy) or Form T-2R (Short Form Residential Mortgagee Policy) may be used for residential loans.

M

Market Value: The current value of your home based on what a purchaser would pay. May differ from assessed value or appraised value.
Mortgage Insurance Premium (MIP): The amount paid by a borrower for mortgage insurance, either to a government agency (such as FHA) or a private mortgage insurance (PMI) company.
Mortgage Lender: The lender providing funds for a mortgage. Lenders manage the credit review, property evaluation, and loan process through closing.
Multiple Listing Service (MLS): A local organization that collects, catalogs, and distributes home listings for sale and lease, as well as past sales data. REALTORS® access the MLS through membership.

N

Non-Realty Items Addendum: A form used to add personal property (e.g., patio furniture, appliances) to the sale when such items are not typically included in the contract.

O

Offer: A formal request to buy a home, typically presented as a contract and addenda outlining all terms and conditions.
Option Period: An agreed-upon period in the contract during which the buyer may terminate for any reason. Buyers typically conduct inspections during this time.
Owner's Policy: Title insurance that protects the property owner against loss from defects in the title. Optional but commonly recommended when purchasing property.

P

Paid Outside Closing (POC): Charges paid by the buyer, seller, lender, or mortgage broker outside of the closing. These items are not included in the funds disbursed at closing.
Personal Property: Property that is not real property. Examples include furniture, televisions, refrigerators, and washers and dryers. Personal property may be included in the sale if specified in the contract.
Points: Prepaid interest on a loan, often equal to one percent of the loan amount.
Possession: The right to occupy and enjoy the property. Buyer possession normally occurs after closing and funding. Parties may agree to early or delayed possession under a temporary lease.
Pre-Approval: A lender's preliminary approval to grant a loan up to a specified amount, subject to full documentation. Strengthens a buyer's negotiating position.
Pre-Qualification: A lender's estimate of how much a buyer may borrow, based on information provided. Less formal than pre-approval and often used early in the search.
Preliminary Report: A report issued before closing that identifies the condition of title and the steps needed to complete the transfer. Often used interchangeably with commitment or title commitment.
Premium: In title insurance, the one-time charge for the policy. In Texas, the promulgated premium includes title examination and closing the transaction, whether or not performed by an attorney.
Prepaids: Items paid in advance of the first scheduled loan payment, such as homeowner's insurance premium, mortgage insurance premium, prepaid interest, and property taxes.
Principal: The remaining unpaid balance on a mortgage. At closing, accrued and unpaid interest on the principal may also be due.
Private Mortgage Insurance (PMI): Monthly insurance that may be required if the down payment is less than 20% of the purchase price. Protects the lender if the borrower defaults.
Promissory Note: A document signed by the buyer setting the terms of the loan, including principal amount, interest rate, and payment term.
Promulgated Rates: Title insurance rates prescribed by the Texas Department of Insurance. In Texas, rates are the same across title companies for the same risk.

R

Rate Lock: An agreement in which an interest rate is guaranteed for a specified period before closing.
Real Estate Broker: A real estate agent with additional education who has passed the state broker exam and meets minimum transaction requirements.
Real Estate Settlement Procedures Act (RESPA): A federal law that governs disclosure of charges in federally related mortgage transactions.
Real Property: Land and anything permanently affixed to it, including buildings, fences, trees, and minerals. Distinguished from personal property.
REALTOR®: A real estate agent who is a member of the National Association of REALTORS®, upholding certain standards and codes of ethics.
Release of Lien: A document recorded to remove a lien from the property. Lenders typically issue a release of lien after the loan is paid in full.
Restrictive Covenant: A condition or limitation on the use of property, typically in subdivision deeds or declarations. May limit building style, use, or activities.

S

Sales Contract: A legal agreement between buyer and seller to purchase real estate for a specified price and terms. The executed contract and addenda.
Seller's Agent: The real estate agent who represents the seller, marketing the home and negotiating on the seller's behalf.
Settlement Statement: A closing document that itemizes all charges and credits for both buyer and seller, showing how funds are disbursed.
Substitute Form 1099-S: A tax form that reports proceeds from the sale of real estate. The closing statement may serve as a substitute when the formal 1099-S is not yet available.
Survey: A drawing of your property prepared by a Registered Professional Land Surveyor showing boundary lines, improvements, easements, building lines, and encroachments.
Survey Deletion Coverage: Amendment to the owner's title policy that removes the standard exception for boundary and encroachment matters when the buyer purchases survey coverage and the title company approves the survey.

T

Texas Department of Insurance (TDI): The state agency that regulates the insurance industry in Texas, including title insurance companies and agents.
TILA-RESPA Integrated Disclosure (TRID): The set of federal rules that combine loan estimate and closing disclosure forms. TRID requires the Loan Estimate and Closing Disclosure.
Title: Your right of ownership and your ability to sell or transfer property.
Title Commitment: A preliminary report issued by the title company before closing, showing the current state of title, exceptions to coverage, and requirements for the policy to be issued. Also called commitment for title insurance.
Title Defect: Any matter that affects the marketability or validity of title, such as unreleased liens, errors in public records, forgery, or undisclosed heirs.
Title Examination: The process of searching and analyzing public records to determine the ownership history and condition of title.
Title Insurance: Insurance that protects against unknown liens, debts, or claims by others to ownership or rights in your property that were not known or disclosed at closing.
Title Insurance Agent: A person or business authorized by a title insurance company to solicit title insurance, collect premiums, and issue or countersign policies. In Texas, agents must maintain an abstract plant for each county where they operate.
Title Insurance Company: An insurer authorized to issue title insurance policies in Texas. May be a domestic Texas company or a foreign company with a certificate of authority.
Truth in Lending Act (TILA): A federal law that requires lenders to disclose the cost of credit, including the APR and finance charge.

V

Vesting: The manner in which title is held, such as sole ownership, joint tenancy, or community property. Determines ownership rights and how property passes at death.

W

Warranty Deed: A deed that transfers title and includes the grantor's warranty that title is good. The deed is recorded and conveys title to the new owner(s).

Tools & Resources

Additional tools and resources are in development and will be added here as they become available.

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"The limits of my language mean the limits of my world."

— Ludwig Wittgenstein

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