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.
A Qualified First-Time Homebuyer Distribution allows individuals to withdraw up to $10,000 from their IRA without the usual 10% early withdrawal penalty, specifically for the purchase, construction, or reconstruction of a first home.
Qualified mortgage interest is the interest paid on a loan secured by your main home or a second home that may be deductible from your taxable income, subject to specific IRS limits and rules.
Qualifying income is the total verifiable and stable income a borrower can demonstrate to a lender to secure financing, primarily used to assess repayment capacity for mortgages and real estate loans.
Qualifying ratios are financial metrics used by lenders to assess a borrower's capacity to repay a loan by comparing their gross monthly income to their existing debts and proposed housing expenses.
Quantitative Easing (QE) is a monetary policy where a central bank buys government bonds and other financial assets to inject money into the economy, lower long-term interest rates, and stimulate economic activity during downturns.
A rate buydown is a financing strategy where an upfront fee is paid to reduce the interest rate on a mortgage, either temporarily for the initial years or permanently for the life of the loan. This lowers monthly mortgage payments and enhances affordability.
Real estate closing is the final step in a property transaction where ownership is legally transferred from seller to buyer, all documents are signed, and funds are exchanged.
Real estate debt protection refers to various mechanisms and strategies employed by investors and lenders to mitigate the financial risks associated with real estate loans, safeguarding against potential defaults or losses.
Real estate refinancing is the process of replacing an existing mortgage loan with a new one, typically to secure better terms, lower payments, or access property equity for investment purposes.
A type of loan where the lender can seize not only the collateral but also other assets of the borrower if the collateral value is insufficient to cover the debt after a default.
A legally defined timeframe after a foreclosure sale during which the original homeowner can reclaim their property by paying the full outstanding debt, plus costs and interest.
Refinancing in real estate involves replacing an existing mortgage with a new one, typically to secure more favorable terms, lower interest rates, or access accumulated equity.
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