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 independent financial professional who acts as an intermediary between borrowers and multiple lenders, helping real estate investors find and secure the most suitable mortgage products and terms for their investment properties.
A Mortgage Credit Certificate (MCC) is a federal tax credit that allows eligible first-time homebuyers to claim a portion of their annual mortgage interest as a direct dollar-for-dollar reduction of their federal income tax liability.
Mortgage debt is the total outstanding amount of money a borrower owes to a lender for a loan secured by real estate. It typically includes the remaining principal balance and any accrued interest, paid over a set period.
Mortgage interest is the cost charged by a lender for borrowing money to purchase a property, calculated as a percentage of the outstanding loan principal. It's a critical component of monthly mortgage payments and a significant factor in real estate investment profitability.
The Mortgage Interest Deduction allows homeowners to subtract the interest paid on their home mortgage from their taxable income, reducing their overall tax liability. It applies to qualified acquisition debt on a primary residence and one other qualified home, subject to specific debt limits and itemization requirements.
A mortgage note is a legally binding document signed by a borrower, promising to repay a loan used to purchase real estate, outlining the specific terms of repayment.
A regular, typically monthly, payment made by a borrower to a lender to repay a home loan, usually comprising principal, interest, property taxes, and homeowners insurance (PITI).
Mortgage pre-approval is a formal assessment by a lender of how much money you can borrow for a mortgage, based on your verified financial information, providing a strong advantage when making an offer on a property.
A mortgage rate is the interest percentage charged by a lender on a home loan, directly determining the cost of borrowing and influencing monthly payments and total repayment amount.
A mortgage rate lock is a lender's guarantee to hold a specific interest rate for a set period, protecting borrowers from rising rates during the loan application and closing process.
The mortgage rate lock-in effect occurs when homeowners with low-interest rate mortgages are reluctant to sell their properties or refinance, due to significantly higher prevailing interest rates for new loans.
Mortgage rates are the interest percentages charged on real estate loans, determining the cost of borrowing and significantly impacting monthly payments and investment profitability.
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