Loan types, lending terms, mortgage products, hard money lending, and financing strategies for real estate.
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Foundation terms you need to know first (55 terms)
A traditional bank mortgage is a conventional loan provided by a financial institution to purchase real estate, following guidelines from Fannie Mae and Freddie Mac, commonly used by investors to finance properties.
Principal paydown is the portion of your mortgage payment that reduces the outstanding loan balance, directly building equity in your real estate investment over time.
A repair credit is a financial concession from a seller to a buyer at closing, typically used to cover the cost of necessary repairs identified during a home inspection, reducing the buyer's upfront cash needed.
An owner-occupied property is real estate where the owner lives as their primary residence, often qualifying for favorable financing, lower down payments, and significant tax benefits.
A credit bureau is a company that collects and maintains financial information about individuals, compiling it into credit reports used by lenders to assess creditworthiness.
Complex strategies and professional concepts (37 terms)
Slow BRRRR is an advanced real estate investment strategy that extends the traditional BRRRR (Buy, Rehab, Rent, Refinance, Repeat) cycle over a longer period, often several years, to maximize equity appreciation and mitigate market risks.
A legally binding contract that alters the priority of liens on a property, allowing a senior lienholder to voluntarily place their claim in a junior position to another, typically to facilitate new financing or complex transactions.
Capital stacking is an advanced real estate financing strategy involving the layering of multiple debt and equity instruments to fund a property acquisition or development, optimizing the capital structure for specific risk-return profiles.
Premium financing is a sophisticated financial strategy where an investor borrows funds from a third-party lender to pay the premiums on a large insurance policy, typically a life insurance policy or substantial commercial property insurance, using the policy itself or other assets as collateral.
Subject-To investing is an advanced real estate strategy where an investor acquires a property by taking over payments on the seller's existing mortgage, without formally assuming the loan or notifying the lender.
A 1-4 Family Rider is a mortgage contract addendum for properties with one to four residential units, granting the lender additional rights and protections, particularly concerning rental income in the event of borrower default.
The 10-Year U.S. Treasury Note is a government debt security with a 10-year maturity, whose yield serves as a critical benchmark for long-term interest rates, including mortgage rates, and reflects broader economic expectations.
A 401(k) loan allows participants to borrow a portion of their vested retirement savings, repaying the principal and interest back into their own account, often used by real estate investors for short-term capital needs like down payments or rehabilitation.
Accessing equity refers to the process of converting a portion of your property's ownership value into liquid cash, typically through various financing methods like refinancing or home equity loans.
Accrued interest is the amount of interest that has accumulated on a loan or investment but has not yet been paid or disbursed. In real estate, it's crucial for understanding loan obligations, especially with deferred payment structures or interest-only periods.
An Adjustable-Rate Mortgage (ARM) is a home loan where the interest rate can change periodically based on an index, leading to fluctuating monthly payments after an initial fixed-rate period.
The advance rate is the percentage of a collateral's value that a lender is willing to finance, commonly used in asset-based lending or lines of credit, determining the maximum loan amount available against specific assets.
Affordability in real estate refers to a buyer's ability to comfortably manage the costs associated with purchasing and owning a property, considering their income, debts, and current market conditions.
A critical financial assessment for real estate investors to determine if a property's costs, including mortgage, taxes, insurance, and operating expenses, are sustainable relative to their income and other financial obligations, ensuring positive cash flow and mitigating risk.
An all-cash offer in real estate is a proposal to purchase a property without requiring any financing, such as a mortgage. The buyer pays the entire purchase price directly from their available funds, leading to a faster and often simpler transaction.
Alternative capital sources are non-traditional funding options for real estate investments, including private money, hard money, seller financing, and crowdfunding, offering flexibility and speed for deals that may not qualify for conventional bank loans.
Alternative lending encompasses non-traditional financing sources like hard money, private lenders, crowdfunding, and seller financing, offering speed and flexibility for real estate investments, often prioritizing asset value over borrower credit.
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