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.
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 (38 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.
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.
A FICO Score is a three-digit number that summarizes your credit risk, used by lenders to determine your creditworthiness for loans, including mortgages.
The FOMC Dot Plot is a visual representation of individual Federal Open Market Committee members' projections for the future path of the federal funds rate, offering insights into the Federal Reserve's monetary policy outlook.
The Federal Funds Rate is the target interest rate for overnight lending between commercial banks, influenced by the Federal Reserve to manage inflation and employment, and serving as a benchmark for other interest rates, including mortgages.
The Federal Open Market Committee (FOMC) is the monetary policy-making body of the U.S. Federal Reserve, responsible for setting interest rates and influencing the money supply to achieve maximum employment and price stability.
The Federal Reserve is the central banking system of the United States, responsible for conducting monetary policy, supervising banks, and maintaining financial stability, significantly impacting interest rates and the real estate market.
Financial readiness is the state of having your personal finances in order, including stable income, manageable debt, a strong credit score, and sufficient savings, to confidently undertake real estate investments.
The process of obtaining funds or capital to acquire, develop, or manage real estate investments, typically involving borrowed money from lenders (debt financing) or capital from investors (equity financing).
A financing contingency is a clause in a real estate purchase agreement that makes the sale conditional upon the buyer securing a mortgage loan, protecting the buyer's earnest money if financing falls through.
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