Real Estate Dictionary

Pre-Approval

A letter from a lender confirming how much they're willing to lend you based on your credit, income, and assets. This is different from pre-qualification — pre-approval carries real weight with sellers.

Debt-to-Income Ratio (DTI)

The percentage of your gross monthly income that goes toward debt payments. Lenders use this to assess your ability to repay. Most conventional loans prefer a DTI below 43%.

Earnest Money

A good-faith deposit made when you submit an offer, typically 1–2% of the purchase price. It shows you're serious — and goes toward your closing costs or down payment if the deal closes.

Contingency

A condition that must be met for the sale to proceed. Common ones include financing contingencies (the loan must be approved), inspection contingencies, and appraisal contingencies.

Multiple Offer Situation

When more than one buyer submits an offer on the same property at the same time. This often leads to buyers submitting their 'highest and best' offer.

Escalation Clause

A clause that automatically increases your offer price by a set amount above competing offers, up to a maximum you specify. Useful in competitive markets.

Appraisal

An independent valuation of the home performed by a licensed appraiser — required by most lenders. If the home appraises below the purchase price, it can trigger renegotiation.

Inspection

A thorough examination of the home's condition by a licensed inspector. The report covers structure, systems, and safety issues. You can use findings to negotiate repairs or credits.

Title Search

A review of public records to confirm the seller has clear ownership of the property and that there are no liens, disputes, or legal claims against it.

Clear to Close (CTC)

The lender's final approval that all conditions have been met and the loan is ready to fund. This typically comes a few days before closing.

Closing Disclosure (CD)

A 5-page document from your lender that outlines all final loan terms, monthly payments, and closing costs. You receive it at least 3 business days before closing.

Escrow

A neutral third party that holds funds and documents during the transaction. At closing, the escrow officer disburses money and records the deed.

Title Insurance

Protects you (owner's policy) and your lender (lender's policy) from financial loss due to defects in the title discovered after closing — like unknown liens or forged documents.

Prorations

The division of property taxes, HOA dues, or other ongoing costs between buyer and seller, calculated based on the closing date. You'll see these as credits or debits on your closing statement.

HOA (Homeowners Association)

An organization that manages a community's shared spaces and enforces rules. If a home has an HOA, you'll pay monthly or annual dues and be subject to their regulations.

Equity

The difference between what your home is worth and what you owe on it. As you pay down your mortgage and the home appreciates, your equity grows.

Homestead Exemption

A property tax benefit available to primary residents in Louisiana. Filing for homestead exemption can reduce the assessed value of your home for tax purposes — saving you money annually.

Elevation Certificate

A document that shows a property's elevation relative to the Base Flood Elevation (BFE). Used by insurance companies to determine flood insurance premiums.

NFIP (National Flood Insurance Program)

Federally-backed flood insurance available to homeowners in participating communities. Required by most lenders if a property is in a high-risk flood zone.

Act of Sale

Louisiana's equivalent of a closing or settlement. The official transfer of property from seller to buyer, executed in the presence of a notary public.

Cash Value vs. Replacement Cost

Terms in your homeowner's insurance policy. Replacement cost pays to rebuild at today's prices; actual cash value pays replacement cost minus depreciation. Always opt for replacement cost if you can.