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.
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 principal payment is the portion of a loan payment that directly reduces the outstanding balance of the original amount borrowed, contributing to equity growth in real estate.
Principal and Interest (P&I) refers to the portion of a loan payment that goes towards reducing the outstanding loan balance (principal) and compensating the lender for the use of their money (interest). It is a fundamental component of mortgage payments for real estate investors.
Principal and Interest (P&I) refers to the portion of a loan payment that repays the original borrowed amount (principal) and covers the cost of borrowing (interest), forming the core of a mortgage payment.
A private lender is an individual or entity that provides capital for real estate investments outside of traditional financial institutions, offering flexible terms and faster funding for unique or time-sensitive deals.
Private lending involves individuals or non-institutional entities providing real estate loans, typically secured by property, characterized by flexible terms, faster funding, and higher interest rates than traditional banks.
Private lending with life insurance policy loans involves borrowing against the cash value of a permanent life insurance policy to fund real estate investments, offering a flexible and often tax-advantaged financing method.
A private money loan is a non-bank loan provided by individuals or private companies, secured by real estate, offering flexible terms and fast funding for real estate investors.
Private Mortgage Insurance (PMI) is a type of insurance required by lenders for conventional loans when a borrower makes a down payment of less than 20%, protecting the lender in case of default.
Project financing is a long-term, non-recourse or limited-recourse financing structure used to fund large-scale infrastructure, industrial, and real estate projects, where repayment is based solely on the project's future cash flows.
A promissory note is a legally binding written promise by one party to pay a specific sum of money to another party on a specified date or on demand, outlining all loan terms.
Property underwriting is the comprehensive process of evaluating the risks and potential returns of a real estate investment to determine its suitability for acquisition or financing, involving detailed financial, market, and property-specific analysis.
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