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.
Assets or property that a lender deems acceptable to secure a loan, providing assurance that the borrower will fulfill their repayment obligations and allowing the lender to recover funds in case of default.
A record of an individual's past and current jobs, including employers, job titles, and dates of employment, used by lenders to assess financial stability for real estate loans.
Employment verification is the process by which a lender confirms a borrower's current employment status, job title, and income to assess their ability to repay a loan.
Equity build-up refers to the increase in a property owner's stake or ownership percentage in a real estate asset over time. It primarily occurs through two mechanisms: principal paydown on a mortgage and property value appreciation.
Equity conversion is the process by which real estate investors transform the accumulated equity in their properties into accessible cash or other liquid assets, typically for reinvestment, debt consolidation, or other financial objectives.
Equity crowdfunding allows multiple investors to collectively fund real estate projects through online platforms, receiving an equity stake and sharing in potential profits and appreciation. It democratizes access to real estate investments by lowering entry barriers.
Equity financing involves raising capital by selling ownership shares in a real estate project or company to investors, who then become part-owners and share in profits and risks.
A legal arrangement where a neutral third party holds funds and documents until specific conditions of a contract are met, ensuring a secure and fair transaction, especially in real estate.
An escrow agreement is a legal document outlining the terms and conditions under which a neutral third party, known as an escrow agent, holds assets or funds on behalf of two or more parties until specific contractual obligations are met.
Escrow instructions are legally binding documents that outline the specific terms and conditions under which an escrow agent will hold and disburse funds and documents during a real estate transaction.
An FHA 203k loan is a government-insured mortgage that allows homebuyers to finance both the purchase or refinance of a property and the cost of its rehabilitation or renovation into a single loan, based on the property's value after improvements.
An FHA loan is a government-insured mortgage backed by the Federal Housing Administration, offering lower down payments and more flexible credit requirements to make homeownership more accessible.
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