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.
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.
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.
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 (44 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.
Tax-exempt debt refers to bonds or other debt instruments issued by governmental entities or qualified private entities, where the interest earned by the bondholder is exempt from federal, and often state and local, income taxes.
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.
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.
Mortgage-Backed Securities (MBS) are investment vehicles representing claims on the cash flows from a pool of mortgage loans, allowing investors to indirectly participate in the mortgage market.
A multifamily loan is a type of commercial real estate financing used to purchase, refinance, or develop properties with five or more residential units, distinct from traditional single-family mortgages.
Negative equity occurs when the outstanding balance of a loan secured by a property exceeds the property's current market value, often referred to as being "underwater" or "upside down."
A Net 30 account is a trade credit agreement allowing a business to purchase goods or services and pay the invoice within 30 days, offering short-term, interest-free financing and an opportunity to build business credit.
A non-recourse loan is a type of secured debt where the lender's claim for repayment is limited solely to the collateral property, protecting the borrower's personal assets from seizure in the event of default.
A Notice of Default (NOD) is a public record filed by a lender or trustee when a borrower fails to make timely mortgage payments, initiating the formal foreclosure process in non-judicial foreclosure states. It serves as a legal declaration of default and intent to sell the property if the debt is not cured.
Out-of-state lending refers to securing financing for a real estate investment property located in a different state than the borrower's primary residence or the lender's main operational base. It enables investors to expand their portfolios beyond local markets.
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