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.
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.
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.
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.
A professional, unbiased report by a licensed appraiser that estimates a property's fair market value at a specific point in time, primarily used for financing and real estate transactions.
Asset verification is the process lenders use to confirm a borrower's financial resources, ensuring they have sufficient funds for a down payment, closing costs, and reserves for a real estate purchase.
A borrower is an individual or entity who receives funds from a lender with the promise to repay the money, typically with interest, according to the terms of a loan agreement.
Borrowing costs are the expenses incurred when taking out a loan or using credit, primarily consisting of interest payments and various fees charged by lenders.
Business credit is a credit profile established for a business entity, separate from its owner's personal credit, used to secure financing and establish credibility for commercial activities.
A financial tool for businesses to manage expenses, separate personal and business finances, and build business credit history.
A business loan is a type of financing provided to a business entity or investor to acquire, develop, or renovate real estate for investment purposes, with repayment based on the business's financial health and the property's income potential.
The Closing Date is the scheduled day when a real estate transaction is finalized, ownership officially transfers from seller to buyer, and all financial and legal requirements are met.
Closing Day is the official date when a real estate transaction is finalized, ownership is transferred, and all necessary documents are signed and funds exchanged between the buyer and seller.
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