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.
The HELOC draw period is the initial phase of a Home Equity Line of Credit during which a borrower can access funds, make interest-only payments, and repeatedly borrow against their home equity up to a set credit limit.
A hard inquiry is a request by a lender to review your credit report when you apply for new credit, such as a mortgage or loan. It is recorded on your credit report and can temporarily lower your credit score by a few points.
A hard money lender provides short-term, asset-based loans secured by real estate, primarily focusing on the property's value and the investor's exit strategy rather than traditional creditworthiness.
A hard money loan is a short-term, asset-backed real estate loan from private lenders, primarily based on the property's value rather than the borrower's credit, used for quick acquisitions or rehab projects.
A high-interest-rate environment is a period characterized by elevated borrowing costs, typically driven by central bank policies to combat inflation, significantly impacting real estate financing, property values, and investment strategies.
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by the equity in your home, allowing flexible borrowing and repayment up to a set limit.
A Home Equity Loan is a type of second mortgage that allows homeowners to borrow a lump sum against the equity in their property, repaid over a fixed term with a fixed interest rate. It's often used by real estate investors to fund new acquisitions or property improvements.
House hacking is a real estate investment strategy where you live in one unit of a multi-unit property or a portion of a single-family home, and rent out the remaining units or rooms to cover your housing expenses.
The Housing Expense Ratio is a financial metric used by lenders to assess a borrower's ability to afford housing costs, representing the percentage of gross monthly income allocated to housing-related expenses.
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.
The Infinite Banking Concept (IBC) is a financial strategy where individuals or businesses use a specially designed participating whole life insurance policy to become their own bank, financing major purchases and investments, including real estate, with policy loans.
An installment sale is a transaction where a seller finances the buyer's purchase of property, receiving at least one payment after the tax year of the sale, thereby deferring capital gains taxes over time.
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