Definitions of the legal, financial, and real estate terms that come up most often in owner-financed Texas land transactions. Specific to Texas law and practice where applicable.
Warranty Deed
A type of property title transfer used in Texas where the seller guarantees clear title against any prior claims, encumbrances, or defects in ownership history. It conveys full legal ownership to the buyer at closing and is recorded in the county clerk's office. TerraFunded uses Warranty Deeds for every transaction, distinguishing its model from contracts for deed where the seller retains title until the loan is paid off.
Special Warranty Deed
A title transfer in Texas where the seller only guarantees the title against claims that arose during the seller's period of ownership — not against earlier defects. It is common in commercial transactions and bank-owned (REO) sales. It conveys ownership but offers narrower protection than a general Warranty Deed.
Contract for Deed (Land Contract)
A financing arrangement where the seller retains legal title to the property until the buyer pays the loan in full, while the buyer takes possession and makes installment payments. In Texas, contracts for deed are heavily regulated under Chapter 5 of the Property Code and historically have been associated with predatory practices. They differ fundamentally from Warranty Deed sales because the buyer does not own the land during the payoff period.
Deed of Trust
The security instrument used in Texas in place of a mortgage. It involves three parties: the borrower (grantor), the lender (beneficiary), and a neutral third-party trustee who holds legal title to the property as collateral until the loan is repaid. If the borrower defaults, the trustee can conduct a non-judicial foreclosure sale, which is faster than the judicial foreclosure used in mortgage states.
Promissory Note
A written promise to repay a loan under specific terms — including the principal amount, interest rate, payment schedule, maturity date, and consequences of default. In an owner-financed Texas land transaction, the buyer signs a promissory note to the seller that is secured by a Deed of Trust against the property.
Owner Financing (Seller Financing)
A real estate sale in which the seller acts as the lender, so the buyer pays the seller in installments instead of getting a bank mortgage. In Texas, owner financing usually combines a Warranty Deed at closing with a promissory note and a Deed of Trust. Qualification depends on the seller: many do not use bank-style underwriting, and seller-financed loans can be subject to federal and Texas lending rules.
Title Insurance
An insurance policy that protects a property buyer (and lender, if applicable) against financial loss from defects in the title that existed before the policy date — such as undisclosed liens, errors in public records, forgery, or competing ownership claims. In Texas, title insurance rates are set by the state and the policy is issued by a licensed title company at closing as a one-time premium.
Title Company
A licensed business that researches the chain of title to a property, issues title insurance, holds escrow funds, prepares closing documents, and disburses funds at closing. In Texas, title companies are regulated by the Texas Department of Insurance. Every TerraFunded closing is conducted through a licensed Texas title company so that funds, deeds, and recordings are handled by a neutral third party.
Easement
A legal right granted to a non-owner to use a specific portion of another person's property for a defined purpose — such as utility lines, access roads, drainage, or pipelines. Easements run with the land and remain in effect when ownership changes. In Texas, easements are typically recorded in the county deed records and disclosed in the title commitment before closing.
Lien
A legal claim against a property that secures payment of a debt or obligation. Common types include mortgage liens, tax liens, mechanics liens, and judgment liens. A property cannot be sold with a clear Warranty Deed until existing liens are released or paid off through the closing. The title company verifies that no undisclosed liens exist before issuing title insurance.
Plat
A scaled map filed with the county that shows how a tract is divided into lots, with dimensions, easements, roads and common areas. In Texas a division of land outside city limits usually needs an approved, recorded plat, but a county may not require one when every lot is more than 10 acres and the owner does not lay out streets, alleys, parks or other common areas (Local Government Code Section 232.0015(f)). Inside a city or its extraterritorial jurisdiction (ETJ), the city's own subdivision rules apply.
Survey
A measured drawing prepared by a licensed surveyor showing the exact boundaries, dimensions, and improvements of a specific parcel of land. In Texas, lenders and title companies typically require a current survey at closing to confirm boundaries, identify encroachments, and locate easements. Surveys are distinct from plats — a plat covers the entire subdivision, while a survey is specific to one parcel.
Closing
The final stage of a real estate transaction in which the buyer receives the deed, the seller receives the agreed funds, and all documents are signed, notarized, and recorded with the county clerk. In Texas, closings are typically conducted at a title company office, and ownership transfers when the deed is recorded in the public records of the county where the property is located.
Earnest Money
A good-faith deposit made by a buyer when entering into a real estate contract, demonstrating serious intent to purchase. In Texas, earnest money is held in escrow by the title company and is applied toward the purchase price at closing. If the buyer terminates outside the contract terms, the seller may retain it; if the seller defaults or contingencies fail, it is typically refunded.
Subdivision Restrictions (Deed Restrictions)
Recorded covenants, conditions, and restrictions (CCRs) that limit how property within a subdivision may be used — such as minimum building sizes, prohibited structures, livestock rules, or commercial-use bans. In Texas, deed restrictions run with the land and bind all future owners. They are disclosed in the title commitment, and unrestricted parcels (with no recorded CCRs) are typically marketed as such because they offer broader use rights.
Owner's Title Insurance Policy
The title insurance policy that protects you as the owner for as long as you own the property; the separate loan policy protects only the lender, and only until the loan is paid off. In Texas the policy language is standardized and every title company charges the same premium, which is set by the Texas Department of Insurance and based on the sale price. You pay it once, at closing. Every TerraFunded buyer receives an owner's title policy at closing.
Title Commitment
The document a title company issues before closing saying it is willing to insure the title under stated conditions. It lists the requirements that must be met first (for example, releasing an existing lien) and the exceptions the policy will not cover, such as recorded easements, restrictions or mineral reservations. Read the exceptions carefully: every item listed there is a known issue your title policy will not protect you against.
Closing Statement (Settlement Statement)
The itemized accounting of the sale prepared by the title company: the price, the down payment, prorated property taxes, the title premium, recording fees and every other charge and credit for buyer and seller. Both sides sign it at closing, and it is your record of where every dollar went. For many consumer mortgage loans, federal rules also require the lender to give you a five-page Closing Disclosure at least three business days before closing.
Recording
Filing a signed and acknowledged document, such as a deed or a deed of trust, in the real property records of the county clerk where the land is located. Under Texas Property Code Section 13.001, an unrecorded deed or deed of trust is void against a later creditor or buyer who paid value without notice of it, so recording is what protects your ownership against third parties. Once recorded, the document is public and anyone can look it up.
County Clerk
The county office that keeps the official public records, including the real property records where deeds, deeds of trust, plats, easements and lien releases are recorded. Plats for subdivisions outside city limits must be filed and recorded with the county clerk (Local Government Code Section 232.001(d)), and foreclosure notices of sale are filed there too (Property Code Section 51.002(b)). You can search recorded documents and request certified copies at the clerk's office.
Lease with Option to Purchase (Rent-to-Own)
A residential lease combined with the tenant's option to buy the property later, usually at a price set at the start. In Texas a residential lease-option is treated as an executory contract under Property Code Section 5.062(a)(2), and the lease portion is also governed by landlord-tenant law in Chapter 92 (Section 5.0621). If the term is three years or less, generally only a few Subchapter D protections apply (Section 5.062(f)). Until you exercise the option and receive a deed, you are a tenant, not an owner.
Down Payment
The part of the price you pay up front, at closing; the seller or lender finances the rest. A larger down payment means a smaller balance, a lower monthly payment and less total interest. With TerraFunded you can choose a down payment of 5%, 10% or 20% of the financed price, and the $1,000 reservation deposit, which is non-refundable, is applied to it.
Amortization
Paying off a loan through regular installments that cover both interest and principal, so the balance reaches zero with the last scheduled payment. Early payments are mostly interest and later ones are mostly principal; an amortization schedule shows the split for every payment. A fully amortizing loan has no balloon payment at the end.
APR (Annual Percentage Rate)
The yearly cost of a loan expressed as a percentage. According to the Consumer Financial Protection Bureau, it is a broader measure than the interest rate because it also reflects points, broker fees and certain other charges, which makes it useful for comparing offers. With a fixed APR, the rate does not change for the life of the loan.
Balloon Payment
A large, one-time payment due at the end of a loan whose regular payments do not pay it off. Balloon loans usually have shorter terms and lower monthly payments, but you could owe a large amount at the end, according to the Consumer Financial Protection Bureau. Ask whether a seller-financed note has a balloon before you sign; a fully amortizing note does not.
Prepayment Penalty
A fee some lenders charge if you pay off all or part of a loan early. Not every loan has one; if it exists, it appears in the promissory note. In a Texas residential executory contract (contract for deed) covered by Property Code Subchapter D, a prepayment penalty is prohibited (Section 5.073(a)(3)), and the seller must tell you so in writing before you sign (Section 5.071(6)).
Default and Cure Period
Default is failing to make a payment on time or to comply with another term of the loan or contract; the cure period is the time you get, after written notice, to fix it before the seller can enforce a remedy. If a deed of trust covers your residence, Texas requires a certified-mail notice giving at least 20 days to cure before a foreclosure sale can be noticed (Property Code Section 51.002(d)). Under a residential contract for deed, the minimum is 30 days (Section 5.065), or 60 days once you have paid 40% of the amount due or 48 monthly payments, or the contract has been recorded (Section 5.066).
Non-Judicial Foreclosure
The usual way a Texas deed of trust is enforced: a trustee sells the property at public auction under the deed of trust's power of sale, without a lawsuit. The sale is held on the first Tuesday of a month between 10 a.m. and 4 p.m. in the area of the county courthouse designated by the commissioners court, after a notice of sale is posted at the courthouse, filed with the county clerk and sent by certified mail at least 21 days before (Property Code Section 51.002). If the property is the borrower's residence, a notice giving at least 20 days to cure must come first.
RMLO (Residential Mortgage Loan Originator)
An individual who, for compensation, takes a residential mortgage loan application or offers or negotiates its terms; in Texas an RMLO must be licensed and renew the license every year under Finance Code Chapter 180, the Texas SAFE Act (Sections 180.002 and 180.051). A residential mortgage loan includes a loan secured by land on which a home is built or intended to be built, so owner financing of land for a future home can fall under these rules. You can confirm any originator's license on NMLS Consumer Access (nmlsconsumeraccess.org). TerraFunded's financing is reviewed by a licensed RMLO.
SAFE Act
The federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires people who originate residential mortgage loans to be licensed or registered through the Nationwide Mortgage Licensing System and Registry (NMLS). Texas implements it through Finance Code Chapter 180, the Texas SAFE Act. An owner who makes no more than three residential mortgage loans in any 12-month period to buyers of their own property is exempt from that chapter (Section 180.003(a)(5) and (6)); above that number, a licensed originator is needed unless another exemption applies.
Dodd-Frank Seller-Financing Rules
Federal rules adopted under the Dodd-Frank Act in Regulation Z (12 CFR 1026.36) that treat a seller who finances the sale of a dwelling as a loan originator unless an exclusion applies. A seller financing three or fewer properties in 12 months is excluded only if the loan is fully amortizing, has a fixed rate or one that adjusts only after five or more years, and the seller determines in good faith that the buyer can reasonably repay; a natural person, estate or trust financing one property a year has a simpler test. The rules cover consumer credit secured by a dwelling, so financing for land with no home on it may fall outside them.
Appraisal District (CAD)
The local government body, one per county, that appraises property for property tax purposes for every taxing unit in the county (Texas Tax Code Section 6.01). Its chief appraiser keeps the ownership and parcel records and rules on homestead exemption and agricultural (1-d-1) appraisal applications, and its appraisal review board hears value protests. It does not set tax rates or mail the bills: each taxing unit's assessor mails the bill to the person listed on the tax roll (Section 31.01).
Homestead Exemption
A reduction in the taxable value of your principal residence. Texas school districts must exempt $140,000 of a residence homestead's appraised value, plus another $60,000 if the owner is 65 or older or disabled (Tax Code Section 11.13(b) and (c)), and other taxing units may adopt an extra percentage exemption (Section 11.13(n)). The homestead is a home you own and occupy as your principal residence, including a mobile home, together with up to 20 acres used with it (Section 11.13(j)), so land with no home on it does not qualify. You apply through your county appraisal district.
Agricultural Appraisal (1-d-1 Open-Space, Ag Exemption)
Not a true exemption but a special appraisal: qualifying land is taxed on its productive agricultural value instead of its market value, under Article VIII, Section 1-d-1 of the Texas Constitution and Tax Code Chapter 23, Subchapter D. In general the land must be devoted principally to agricultural use, such as crops, livestock or beekeeping on 5 to 20 acres, to the degree of intensity generally accepted in the area, for five of the preceding seven years; qualifying wildlife management is also an agricultural use (Section 23.51). You apply to the chief appraiser of the appraisal district before May 1 (Section 23.54). A later change of use can trigger a rollback tax.
Rollback Tax (Additional Tax on Change of Use)
The additional tax due when land appraised as agricultural or open-space under Tax Code Chapter 23, Subchapter D changes to a use that does not qualify. Under Section 23.55 it equals the difference between the taxes imposed and the taxes that would have been due at market value for each of the three years before the change, and a tax lien attaches to the land on the date of the change. If only part of the tract changes use, for example a homesite, the tax applies only to that part. The chief appraiser must notify the owner, who has the right to protest.
Mineral Estate (Mineral Rights)
Ownership of the oil, gas and other minerals under the land. In Texas it can be severed from the surface when an owner sells the surface and keeps all or part of the minerals; if the deed does not limit or reserve them, the minerals pass with the surface. Texas law treats the mineral estate as dominant, so the mineral owner or its lessee may use the surface as reasonably necessary to explore and produce, subject to the lease, the severance deed and the accommodation doctrine (Railroad Commission of Texas). Your title commitment shows mineral reservations of record.
Surface Estate
Ownership of the land's surface, with the right to build, farm, graze, hunt and live on it, separate from the minerals below. When the mineral estate has been severed, the surface owner holds the land subject to the mineral owner's reasonable use of the surface for oil and gas development. In many parts of Texas the surface and the minerals belong to different people, so read the reservations in the deed and the title commitment before you buy.
Royalty
The mineral owner's share of the oil and gas produced under a lease, or of the money from its sale, usually stated as a fraction or a percentage in the lease or deed. A royalty interest can be bought, sold or reserved separately from the rest of the mineral estate. Texas Property Code Sections 5.151 and 5.152 add protections against certain mailed offers to buy mineral or royalty interests and against sales disguised as oil and gas leases.
Metes and Bounds
A legal description that defines a tract by its boundary lines: a point of beginning, then the direction (bearing) and distance of each line until it closes back at the start, usually tied to a corner of the original land survey. It is the standard way unplatted rural Texas land is described in deeds, and plats outside city limits must also describe the subdivision by metes and bounds and locate it from an original survey corner (Local Government Code Section 232.001(b)). A licensed surveyor prepares and checks it.
Acre
A unit of land area equal to 43,560 square feet, or about 0.4047 hectares. A 10-acre tract covers about 435,600 square feet, the same as a square roughly 660 feet on each side. The acreage in a listing should match the survey and the deed's legal description; if the numbers differ, ask why before closing.
ETJ (Extraterritorial Jurisdiction)
The unincorporated area just outside a Texas city's limits where the city can extend some of its rules, mainly its subdivision and platting ordinances (Local Government Code Section 212.003). Its width depends on the city's population, from one-half mile for cities under 5,000 people up to five miles for cities of 100,000 or more (Section 42.021). Since September 1, 2023, owners can petition the city to release their land from the ETJ (Section 42.102). Whether a tract is in an ETJ decides whose plat rules apply, so check before you buy.
Minor Plat
A simplified plat that many Texas cities and counties offer for a small subdivision, typically a few lots on an existing public road with no new streets or utility extensions. It is a local category: the lot limit and the requirements come from each city's or county's subdivision rules, not from a single statewide definition. Texas law lets a commissioners court delegate plat approval to county staff (Local Government Code Section 232.0022), and a county generally must act on a complete plat application within 30 days (Section 232.0025).
Ingress and Egress (Legal Access)
The legal right to enter (ingress) and leave (egress) a property, either through frontage on a public road or through a recorded access easement across someone else's land. Physical access is not the same as legal access: a track you can drive today may cross a neighbor's land with no recorded right to use it. Before closing, use the survey and the title commitment to confirm how the tract legally reaches a public road.
Road Frontage
The length of a property's boundary that touches a road, usually shown in feet on the survey or plat. Frontage on a public county or state road gives direct legal access without depending on an easement, and it affects where you can place a driveway, a culvert and utility lines. Ask who maintains the road (the county, the state, a group of owners or no one), because that decides who grades and repairs it.
Flood Zone (FEMA Zone X)
The flood-risk category FEMA assigns to land on its Flood Insurance Rate Maps. Zones labeled A (such as A and AE) are Special Flood Hazard Areas, land with a 1 percent chance of flooding in any given year (the 100-year flood); shaded Zone X is moderate risk, between the 100-year and 500-year flood limits; unshaded Zone X is minimal risk, above the 500-year flood level. You can look up any parcel on FEMA's Flood Map Service Center (msc.fema.gov) before you buy.
OSSF (On-Site Sewage Facility, Septic System)
Texas's legal term for a septic system or other private wastewater system, regulated by the Texas Commission on Environmental Quality (TCEQ) under Health and Safety Code Chapter 366, usually through a county or other local authorized agent. As a rule you need a permit and an approved plan before you build one (Section 366.051). A single-family home on a tract of 10 acres or more can be exempt from the permit when every part of the system is at least 100 feet from the property line, a licensed site evaluator or engineer has evaluated the site, and the home is the only dwelling on the tract (Section 366.052 and TCEQ's 10-acre rule). Local programs can be stricter than state minimums, so check with the county before you build.
Site Evaluation (Septic Soil Test)
The soil and site assessment required before a septic system (OSSF) is designed in Texas. It must be done by a TCEQ-licensed site evaluator or a professional engineer, who drills two soil borings or digs two backhoe pits at opposite ends of the proposed disposal area and classifies the soil; the results determine the type and size of the system (30 TAC Section 285.30). Buyers often ask for a perc test; in Texas the required step is this site evaluation. Have it done before you finalize where the house will go.
Groundwater Conservation District (Water Well Permit)
A local district created under Texas Water Code Chapter 36 to conserve and protect groundwater, with its own rules and permits for water wells. A district must exempt from its permit requirement a well used only for domestic use or livestock on a tract larger than 10 acres, if the well cannot produce more than 25,000 gallons a day (Section 36.117(b)(1)). Even an exempt well must be registered with the district and built to its casing and construction rules, and the driller files the well log with the district (Section 36.117(h) and (i)).
Electric Cooperative (Co-op)
A member-owned electric utility organized under Texas Utilities Code Chapter 161. You become a member by using or agreeing to use its service at a dwelling, structure or point of delivery in its service area (Section 161.065). For raw land, ask the co-op that serves the area for its line extension policy and a cost estimate to bring power to your building site before you buy.
911 Address (Rural Address)
The official physical address emergency responders use to find a property. In rural Texas it is assigned by a county or regional 9-1-1 addressing authority, not by the post office; for example, the Central Texas Council of Governments is the designated addressing authority for Bell, Coryell, Hamilton, Lampasas, Milam, Mills and San Saba counties. Expect to provide proof of ownership, such as your deed or a tax statement, plus location details like GPS coordinates. Request it as soon as you plan to build or set up services.