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.
A trigger event in real estate is a predefined condition or occurrence that, when met, automatically initiates a specific action or consequence outlined in a contract, loan agreement, or other legal document.
A Trustee's Sale is a public auction of a property to satisfy a defaulted debt, conducted by a trustee under a deed of trust without court intervention, common in non-judicial foreclosure states.
A USDA Loan is a zero-down payment mortgage program backed by the U.S. Department of Agriculture, designed to help eligible low-to-moderate income individuals purchase homes in designated rural areas.
An underlying mortgage is an existing mortgage loan that remains on a property when additional financing is layered on top or when the property is sold using creative financing methods like "subject-to" deals.
Underwriting is the process by which lenders assess the risk of lending money for a real estate transaction, evaluating the borrower's creditworthiness and capacity to repay, as well as the property's value and marketability.
A mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA) for eligible service members, veterans, and surviving spouses, offering benefits like no down payment and no private mortgage insurance.
VantageScore is a credit scoring model developed by the three major credit bureaus that helps lenders evaluate your creditworthiness, typically ranging from 300 to 850.
A wire transfer is an electronic payment service for transferring funds by wire, typically between banks or financial institutions. It is a fast, secure, and irreversible method often used for large real estate transactions.
A wrap-around mortgage is a form of seller financing where a new, junior loan from the seller to the buyer includes the balance of an existing, underlying mortgage, with the seller remaining responsible for payments on the original loan.
Yield maintenance is a prepayment penalty designed to protect a lender's yield on a commercial loan by ensuring they receive the same return had the borrower not prepaid, typically calculated as the present value of the difference between the loan's interest rate and a benchmark Treasury yield.
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