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.
Private Mortgage Insurance (PMI) is a type of insurance required by lenders for conventional loans when a borrower makes a down payment of less than 20%, protecting the lender in case of default.
Project financing is a long-term, non-recourse or limited-recourse financing structure used to fund large-scale infrastructure, industrial, and real estate projects, where repayment is based solely on the project's future cash flows.
A promissory note is a legally binding written promise by one party to pay a specific sum of money to another party on a specified date or on demand, outlining all loan terms.
Property underwriting is the comprehensive process of evaluating the risks and potential returns of a real estate investment to determine its suitability for acquisition or financing, involving detailed financial, market, and property-specific analysis.
A Qualified First-Time Homebuyer Distribution allows individuals to withdraw up to $10,000 from their IRA without the usual 10% early withdrawal penalty, specifically for the purchase, construction, or reconstruction of a first home.
Qualified mortgage interest is the interest paid on a loan secured by your main home or a second home that may be deductible from your taxable income, subject to specific IRS limits and rules.
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.
Qualifying ratios are financial metrics used by lenders to assess a borrower's capacity to repay a loan by comparing their gross monthly income to their existing debts and proposed housing expenses.
Quantitative Easing (QE) is a monetary policy where a central bank buys government bonds and other financial assets to inject money into the economy, lower long-term interest rates, and stimulate economic activity during downturns.
A rate buydown is a financing strategy where an upfront fee is paid to reduce the interest rate on a mortgage, either temporarily for the initial years or permanently for the life of the loan. This lowers monthly mortgage payments and enhances affordability.
Real estate closing is the final step in a property transaction where ownership is legally transferred from seller to buyer, all documents are signed, and funds are exchanged.
Real estate debt protection refers to various mechanisms and strategies employed by investors and lenders to mitigate the financial risks associated with real estate loans, safeguarding against potential defaults or losses.
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