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 (57 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.
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.
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.
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 (44 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.
Tax-exempt debt refers to bonds or other debt instruments issued by governmental entities or qualified private entities, where the interest earned by the bondholder is exempt from federal, and often state and local, income taxes.
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.
The cost of borrowing money or the return on invested capital, expressed as a percentage of the principal over a specific period, significantly impacting real estate investment profitability and financing decisions.
An interest-only loan is a debt where the borrower pays only the interest on the principal balance for a set period, with no principal reduction during that time. This results in lower initial monthly payments.
An Investment Property Loan is financing used to purchase real estate intended for income generation or capital appreciation, not for the borrower's primary residence. These loans have distinct qualification requirements and terms compared to owner-occupied mortgages.
A joint mortgage is a home loan taken out by two or more borrowers who share equal responsibility for the debt, pooling their incomes and assets to qualify for financing and typically sharing ownership of the property.
A real estate Joint Venture (JV) is a collaborative business arrangement where two or more parties combine resources, expertise, and capital for a specific real estate project, sharing both the risks and rewards.
A judgment lien is a legal claim placed on a debtor's property, typically real estate, as a result of a court-ordered money judgment, securing the creditor's right to collect the debt.
A jumbo loan is a mortgage that exceeds the conforming loan limits set by the FHFA, used for financing high-value properties beyond the scope of conventional loans.
A junior lien is a claim on a property that is subordinate in priority to another existing claim, typically a first mortgage. In a foreclosure, junior lienholders are paid only after all senior lienholders have been fully satisfied, exposing them to higher risk.
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.
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