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.
A secured loan is a debt backed by collateral, such as real estate, which the lender can seize if the borrower defaults, offering lower interest rates due to reduced risk.
A security agreement is a legal document that grants a lender a security interest in specified collateral, typically real estate or other assets, to secure the repayment of a debt. It outlines the terms under which the collateral can be claimed if the borrower defaults.
A security instrument is a legal document that pledges a borrower's property as collateral for a loan, giving the lender the right to seize the property if the borrower defaults on the debt.
Seller concessions are contributions made by the seller towards the buyer's closing costs, reducing the amount of cash the buyer needs to bring to the closing table. These are negotiated as part of the purchase agreement and are subject to lender-imposed limits.
Seller financing is an arrangement where the seller of a property provides a loan to the buyer, who then makes payments directly to the seller instead of obtaining a traditional mortgage.
A senior lien is a legal claim on a property that holds the highest priority for repayment in the event of a foreclosure or liquidation, ensuring its holder is paid before any other creditors.
A real estate transaction where the lender agrees to accept a mortgage payoff amount less than what is owed, typically to avoid foreclosure and mitigate losses.
Short-term capital refers to funds or assets that are readily available for immediate use or are expected to be converted into cash within one year, crucial for covering operational expenses, bridging financing gaps, or seizing fleeting investment opportunities in real estate.
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 Special Purpose Vehicle (SPV) is a legally separate entity, often a subsidiary, created by a parent company to isolate financial risk, facilitate specific transactions, or manage assets and liabilities for a particular project, commonly used in real estate for securitization or complex financing.
Staged funding is a financing method where a lender disburses loan proceeds incrementally as a real estate project progresses, rather than providing the full amount upfront. This approach is common in construction and rehabilitation projects.
Straight-line amortization is a loan repayment method where the principal portion of each payment remains constant throughout the loan term, resulting in decreasing total payments as the interest component declines.
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