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 credit facility is a type of loan arrangement between a borrower and a lender that allows the borrower to draw funds up to a specified maximum amount over a defined period, offering flexibility for various real estate investment strategies.
Credit history is a record of an individual's past borrowing and repayment behavior, crucial for lenders to assess creditworthiness for loans and mortgages.
A credit inquiry is a request by a lender or other authorized party to view your credit report, which can be either a hard inquiry (impacting your score) or a soft inquiry (no impact).
Credit repair is the systematic process of improving one's creditworthiness by identifying and addressing inaccuracies or negative items on credit reports, crucial for real estate investors to secure favorable financing.
A credit report is a detailed record of an individual's credit history, including borrowing and repayment activities, used by lenders to assess creditworthiness.
Credit utilization is the percentage of your available revolving credit that you are currently using, calculated by dividing your total credit card balances by your total credit limits. It's a key factor in your credit score.
A cure period is a specified timeframe granted to a borrower in default to remedy a breach of a loan agreement, typically before the lender can initiate more severe actions like foreclosure or invoke an acceleration clause.
A DSCR loan is a non-qualified mortgage for real estate investors, where loan eligibility is determined by the investment property's Debt Service Coverage Ratio (DSCR), assessing its ability to generate enough income to cover its mortgage payments, rather than the borrower's personal income.
Debt capacity is the maximum amount of debt an individual or entity can prudently take on while maintaining financial stability and meeting repayment obligations. For real estate investors, it's a critical metric for assessing borrowing limits, managing risk, and planning portfolio expansion.
Debt consolidation is a financial strategy where multiple debts, often with varying interest rates and terms, are combined into a single, new loan, typically with a lower interest rate or more favorable payment structure.
Debt financing in real estate involves borrowing money from a lender to acquire, develop, or refinance properties, using the property itself as collateral. It allows investors to leverage capital, amplify returns, and scale their portfolios.
Debt management in real estate investing involves strategically handling financial obligations to optimize cash flow, reduce risk, and maximize returns from investment properties. It encompasses various strategies for acquiring, servicing, and restructuring debt.
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