REIPRIME Logo
Intermediate terms

Essential Income & Employment Terms

This curated collection includes key terms that might be helpful when exploring income and employment for real estate investment. It focuses on how your earnings, their stability, and their structure are viewed by lenders during the loan application process. These terms were selected based on common questions and areas where investors often need clarity.

Learning Path

1

Employment History

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.

Beginner2-3 min
2

Debt-to-Income Ratio

The Debt-to-Income (DTI) Ratio is a financial metric used by lenders to assess a borrower's ability to manage monthly payments and repay debts, calculated by dividing total monthly debt payments by gross monthly income.

Intermediate18-20 min
3

FICO Score

A FICO Score is a three-digit number that summarizes your credit risk, used by lenders to determine your creditworthiness for loans, including mortgages.

Beginner12-13 min
4

Loan Qualification

Loan qualification is the process by which lenders evaluate a borrower's financial health and creditworthiness to determine eligibility for a loan, assessing factors like credit score, debt-to-income ratio, and assets to mitigate risk.

Intermediate13-14 min
5

DSCR Loan

A DSCR loan is a non-qualified mortgage for real estate investors, where loan eligibility is determined by the investment property's Debt Service Coverage Ratio (DSCR), assessing its ability to generate enough income to cover its mortgage payments, rather than the borrower's personal income.

Advanced9 min
6

Side Hustle Income for Real Estate Investors

Side hustle income refers to additional earnings generated outside of a primary job, strategically utilized by real estate investors to fund down payments, renovations, or build cash reserves, thereby accelerating their investment growth.

Intermediate5 min
7

1099 Income

1099 income refers to various types of taxable income reported to the IRS on a Form 1099, typically received by independent contractors, freelancers, or for property sales, requiring self-reporting and estimated tax payments.

Intermediate5 min
8

Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) is a financial metric used in commercial real estate lending to assess a property's ability to generate sufficient Net Operating Income (NOI) to cover its annual mortgage debt payments.

Advanced15-18 min
9

Bank Statement Loan

A Bank Statement Loan is a non-qualified mortgage (Non-QM) product designed for self-employed individuals and real estate investors who cannot easily document their income through traditional tax returns, instead relying on 12-24 months of business or personal bank statements for income verification.

Advanced9 min
10

Income Stability

Income stability refers to the consistency and predictability of rental revenue generated by an investment property, minimizing fluctuations and ensuring reliable cash flow for investors.

Intermediate5-6 min
11

Rental Income

Rental income is the total revenue generated from an investment property through rent payments and other fees, before or after deducting operating expenses. It is a critical metric for evaluating a property's profitability and investment viability.

Intermediate15-18 min
12

Qualifying Income

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.

Intermediate5 min
13

W-2 Income

W-2 income refers to the wages, salaries, and tips an individual earns as an employee, reported annually by their employer on IRS Form W-2, which details gross earnings and taxes withheld.

Beginner2-3 min
14

Passive Income

Passive income refers to earnings from an enterprise in which an individual is not actively involved, typically generated from real estate investments like rental properties, REITs, or syndications, requiring minimal ongoing effort after initial setup.

Intermediate13-15 min
15

Tax Returns

Tax returns are official documents filed with tax authorities, such as the IRS, reporting an individual's or entity's income, expenses, and other financial information to determine tax liability, serving as a critical financial record for real estate investors.

Intermediate4-6 min
16

Underwriting

Underwriting is the process by which lenders assess the risk of lending money for a real estate transaction, evaluating the borrower's creditworthiness and capacity to repay, as well as the property's value and marketability.

Intermediate15-18 min
17

Gross Income

Gross income in real estate is the total revenue a property generates from all sources before any expenses, taxes, or deductions are subtracted. It represents the initial, unfiltered earnings.

Beginner3 min
18

Income Documentation

Income documentation refers to the financial records and statements required by lenders to verify a borrower's ability to repay a loan, crucial for securing real estate financing.

Intermediate5 min