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 Commercial Mortgage-Backed Security (CMBS) loan is a form of commercial real estate financing where multiple commercial mortgages are pooled, securitized into bonds, and sold to investors, offering non-recourse debt for large-scale properties.
Capital markets are financial markets where long-term debt or equity-backed securities are bought and sold, providing the funding necessary for businesses and governments, including real estate developers and investors, to finance their long-term projects.
Capital raising is the process of securing financial resources, through either debt or equity, to fund real estate investment projects and expand an investor's portfolio.
The capital stack is the hierarchical structure of all debt and equity financing used to fund a real estate investment, defining the priority of payment, risk, and return for each capital source.
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.
Capitalized interest refers to interest expenses that are added to the principal balance of a loan or an asset's cost basis, rather than being expensed immediately. This accounting treatment is common during the construction or development phase of a real estate project, increasing the asset's book value.
A cash flow hedge is a derivative instrument used to offset the variability in future cash flows attributable to a particular risk, such as interest rate fluctuations or foreign currency exchange rate changes, thereby stabilizing an entity's financial performance.
Closing costs are the various fees and expenses incurred by buyers and sellers at the end of a real estate transaction, covering services like loan origination, title insurance, appraisal, and legal fees.
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.
The Closing Disclosure (CD) is a five-page document outlining the final terms of a mortgage loan, including the loan amount, interest rate, monthly payments, and all closing costs, provided to the borrower at least three business days before closing.
A co-signer is an individual who legally agrees to be responsible for another person's debt, such as a mortgage, if the primary borrower fails to make payments. This arrangement helps primary borrowers qualify for financing by leveraging the co-signer's stronger credit and income.
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