Buying a home comes with its own vocabulary. These are the terms that come up most often for new-construction buyers in Texas.
Principal: the amount you borrowed. Interest: what the lender charges to lend it. Amortization: the schedule that splits each payment between the two.
APR: the interest rate expressed together with certain lender fees, which makes it a better tool for comparing offers than the rate alone. Points: an upfront fee paid to lower the rate. Escrow: the account your lender uses to collect and pay your property taxes and insurance with each monthly payment.
PMI and MIP: mortgage insurance, required on many loans with less than twenty percent down. Rate lock: a commitment that holds your rate for a set period while your loan closes.
Pre-qualification: an informal estimate based on what you tell the lender. Pre-approval: a stronger, documented review of your income, assets, and credit. Underwriting: the formal verification that happens after you are under contract.
DTI (debt-to-income ratio): your monthly debt payments divided by gross monthly income. LTV (loan-to-value): the loan amount divided by the home value.
Conventional: a loan not insured by a government agency. FHA: insured by the Federal Housing Administration, with lower down payment minimums and mortgage insurance. VA: available to eligible service members and veterans. USDA: available for qualifying properties in eligible rural areas, which includes parts of North Texas outside the urban core.
Fixed-rate versus adjustable-rate: whether the rate stays the same for the life of the loan or adjusts after an initial period.
Earnest money: a good-faith deposit made at contract, applied toward your costs at closing. Appraisal: an independent opinion of value ordered by the lender. Title insurance: protection against defects in the ownership history. Closing Disclosure: the itemized final statement of your loan terms and costs, which you receive before closing.
Closing costs: lender fees, title fees, prepaid taxes and insurance, and escrow funding. They are separate from your down payment.
Elevation: the exterior architectural style of a floor plan. Structural option: a change to the footprint or framing, such as an extended patio, chosen before construction. Change order: a documented modification to the contract after signing.
Spec or inventory home: a home the builder started without a buyer under contract, which becomes a quick move-in home. Punch list: the items noted at your walk-through to be corrected before or shortly after closing. Builder warranty: the coverage for workmanship, systems, and structural components on defined timelines.
Pre-qualification is a quick estimate based on information you provide. Pre-approval involves the lender reviewing documentation of your income, assets, and credit, and it carries far more weight with a builder.
Paying an upfront cost to reduce the mortgage interest rate, either for the full loan term or temporarily for the first years of the loan. Builders and lenders sometimes offer this as an incentive.
It is the portion of your monthly payment set aside by the lender to pay your property taxes and homeowners insurance when they come due. Your escrow amount can change when tax or insurance amounts change.