The terms of the deal: Escrow. Earnest money. Good Faith Estimate. You’ve heard the lingo, but what do these terms actually mean?If you plan to buy or sell property, you'll want to familiarize yourself with the terminology, because understanding the jargon can help you feel more comfortable throughout the real estate transaction.

Earnest money: If you are serious about buying a property, you will typically give the seller a deposit – also known as earnest money. If the offer is accepted, these funds are used as part (or all, depending on how much you put down) of the downpayment. If the seller rejects your offer, you will get your earnest money back. If you pull out of the deal and are not covered by a contingency clause, you may forfeit the earnest money. A large amount of earnest money shows the seller that the buyer is serious about purchasing the home.

Good-faith estimate: A good-faith estimate is a report that the Real Estate Settlement and Procedures Act requires a lender provide to a borrower. The report details the costs you will incur to obtain a mortgage and is based on the lender's typical loan origination costs for the area where your home is located. This form was standardized on January 1, 2010.

Loan-to-value (LTV) ratio: LTV ratio is a figure calculated by dividing the amount you need to borrow to purchase a home by the home's price or appraised value. The lower the LTV ratio, the less risk assumed by the lender. Therefore, a person with a poor credit history might have a better chance of being approved for a loan with a low LTV ratio. You may hear this term tossed around during the initial stages of the mortgage lending process.

Escrow: Escrow means different things at different times. At the beginning of a transaction, your earnest money is deposited in an escrow account, which means it’s held by a third party for safekeeping. Often, that escrow agent is a title company or an attorney. The escrow agent holds the funds and documents related to the transaction until closing.

Another type of escrow concerns some homeowners’ expenses. This is an escrow account similar to a savings account and is set up by your lender. A portion of your monthly payment is deposited into this account each month. Your lender then remits payments for expenses, including property taxes, mortgage insurance and homeowners’ insurance.

Mortgage insurance: Today, many borrowers do not have 20% of the home's purchase price to put down on a property. Mortgage insurance is a p olicy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Many lenders will require borrowers who have a downpayment of less than 20% to purchase mortgage insurance.

Agent vs. broker: These terms are often used interchangeably but have some important distinctions. In Texas, a real estate agent is licensed to buy and sell property, but must do so under the supervision of a broker. An agent looking to become a broker must take additional course work and a more comprehensive written examination compared than the one required for a salesperson license.

Texas Realtor: If you are licensed with the Texas Real Estate Commission, you can legally sell real estate in Texas, but that alone does not qualify you as a Texas Realtor. Only membership in the National Association of Realtors (NAR) permits real estate agents to use the registered trademarked term Realtor. All Texas Realtors are members of NAR, the Texas Association of Realtor, and the vast majority are members of a local association of Realtor.

The difference between a licensed real estate professional and a Texas Realtor is that an agent is simply licensed to sell real estate in Texas, while those agents who choose to become Texas Realtors are additionally bound by a code of ethics. They must maintain the level of integrity and professionalism required by their association memberships.

Your Texas Realtor is here to help you through the homebuying or selling process. If you are uncomfortable with any aspect of the real estate transaction and aren't sure exactly what a term of phrase means, all you have to do is ask.

For more information, I invite you to visit TexasReal Estate.com. For your real estate needs, please contact RE/MAX Genesis at 830-833-2000.