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 land contract is a seller-financed real estate agreement where the buyer makes payments directly to the seller, who retains legal title until the full purchase price is paid.
A lease option is a contract giving a tenant the exclusive right to purchase a property at a set price within a specific timeframe, without the obligation to buy.
A lender is an individual or financial institution that provides funds to a borrower for real estate acquisition or development, expecting repayment with interest. They are crucial for leveraging capital in real estate investment.
Lender risk assessment is the process financial institutions use to evaluate the potential for loss when extending credit for real estate investments, considering borrower, property, and market factors to determine loan approval and terms.
The lender spread is the difference between the interest rate charged on a loan and the lender's cost of funds, encompassing risk premium, operational costs, and profit margin. It directly impacts the total cost of financing for real estate investors.
Lender's interest refers to the financial stake a lender holds in a property or asset that serves as collateral for a loan, ensuring their investment is protected until the debt is fully repaid.
Length of credit history measures how long you've had credit accounts open and active, serving as a key indicator of your experience and reliability in managing debt for lenders.
Leverage in real estate is the use of borrowed capital, typically through mortgages, to finance property purchases and amplify potential investment returns.
Leverage in real estate refers to the use of borrowed capital, typically mortgage loans, to finance a property purchase, aiming to amplify potential investment returns on the equity invested.
A lien is a legal claim or right against a property, granted to a creditor, which serves as security for a debt or obligation until it is satisfied.
A Line of Credit (LOC) is a flexible financing option that allows borrowers to draw funds as needed, up to a pre-approved limit, and only pay interest on the amount borrowed. It provides continuous access to capital, making it a versatile tool for real estate investors.
A loan application is a formal document submitted to a financial institution to request borrowed funds, providing detailed personal and financial information for credit assessment.
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