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.
Real estate refinancing is the process of replacing an existing mortgage loan with a new one, typically to secure better terms, lower payments, or access property equity for investment purposes.
A type of loan where the lender can seize not only the collateral but also other assets of the borrower if the collateral value is insufficient to cover the debt after a default.
A legally defined timeframe after a foreclosure sale during which the original homeowner can reclaim their property by paying the full outstanding debt, plus costs and interest.
Refinancing is the process of replacing an existing mortgage or loan with a new one, often to secure better terms, lower interest rates, or access built-up property equity.
Refinancing risk is the potential for an investor to be unable to refinance existing debt on favorable terms, or at all, when the current loan matures or a new financing need arises. This risk can lead to increased costs, reduced cash flow, or even foreclosure.
Remote closing allows real estate transactions to be completed without all parties physically present, leveraging digital tools for document signing, notarization, and fund transfers. It offers convenience and efficiency, especially for out-of-state investors.
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.
A reverse mortgage allows homeowners, typically seniors aged 62 or older, to convert a portion of their home equity into tax-free cash without having to sell their home or make monthly mortgage payments. The loan is repaid when the last borrower leaves the home permanently.
An SBA Loan is a small business loan partially guaranteed by the U.S. Small Business Administration, primarily used for owner-occupied commercial real estate with favorable terms and lower down payments.
Scheduled capital calls are pre-planned requests by a fund manager or syndicator for investors to contribute committed capital on specific dates, typically for real estate projects or acquisitions.
A seasoning period is a mandatory waiting time, typically 6-12 months, that a borrower must own a property before qualifying for a cash-out refinance or other equity-based loans, implemented by lenders to mitigate risk and verify property value.
The secondary mortgage market is a financial marketplace where existing mortgage loans and mortgage-backed securities (MBS) are bought and sold by investors, providing liquidity to primary lenders and influencing interest rates.
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