Understanding investor lingo can be like talking to a doctor about an advanced medical procedure and feeling overwhelmed. If you find yourself at an investor networking event, you’ll hear everything from ARV to LTV and LTC, which can be intimidating. Don’t be confused or afraid to ask questions, let this glossary give you the confidence to excel as a real estate investor.
Use this resource to sharpen your investor lingo and sound like a seasoned pro. We are confident you’ll be speaking fluent investor language in no time.
Adjustable Rate Mortgage, there are a lot of Myth’s to these loans, if you’re curious, ask us and we’d be happy to bust them!
After Repair Value, what the is property going to be worth after it is renovated
The value of the property in its current state before it is renovated
Assess the value of a property that lenders utilize for determining the loan amount
The fee the wholesaler collects by assigning their contract to the end (investor) buyer. Typical example is wholesaler signs contact to buy house from Seller for X amount then turns around and “assigns” (sells for a lack of better terms) the contract to end (investor) buyer for X + their Assignment fee amount.
Someone who finds leads/deals for wholesalers
Clear To Close aka Final Approval
Refers to the expenses incurred from the time a property is acquired until the time it is sold which includes any and all loan payments, home owners insurance, property taxes and home owners association fees (if applicable).
The Approval right before the Final Approval in that it lets all parties know the subject loan is Approved based upon the following Conditions.
Long Term Traditional Government backed loans
Comps is short for Comparables as in what other properties are comparable to the subject property as you want to compare Apples to Apples when it comes to real estate.
Days on Market, how many Days on Market will it take before the property sells
Debt To Income (ratio). What are your Debts To Your Income as a % Ratio. DTI is used for traditional long term loan (Conventional, FHA, VA, etc) underwriting as a percentage of your income not to be exceeded, typically <45%-50%.
Legal document that pledges the property as security/collateral for the loan and is transferred to a trustee which holds it as a security between the borrower and lender (title remains in the borrowers name).
Difference between, most often used when discussing numbers
Simultaneous closing that typically happens between 3 parties, 1) the original seller to 2) the new owner and then from2) the new owner to 3) the new buyer. Most often used during wholesale real estate transactions.
2 unit property
Similar to Liquidate, the term fire-sell is used when selling a property fast, usually at a lower price
Our definition: the ATOMIC BOMB of credit, avoid by all means possible. Google definition: the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.
4 unit property
Home equity line of credit
Home Owners Insurance
AKA Closing Statement is a standard form (still used in Private Lending) used to break down and itemize the fees and services charged to the buyer/new owner of the property.
Interest Only, instead of paying Principal & Interest with your monthly payment, you pay Interest Only. Cool perk: I/O loans carry a lower monthly payment.
Joint Venture, similar to partnering on a deal
Loan To Value, what is the Loan To (the) Value of the property
Similar to Fire-Sell, the term liquidate is typically used when a seller is selling a property fast, often at a lower price
Refers to the signing of the final documentation (usually a date and time) that triggers the transfer of ownership of a property (friendly hint, you’re not quite done at this point, please visit Loan Funding) from one party to another.
This is when the real magic happens and true ownership is transferred when the keys are given to the buyer/new owner as this is when the money actually exchanges hands/accounts via the Title Company.
Non-Owner Occupied property
Refers to a real estate transaction in which the Seller and Buyer have an existing relationship (often between family members but not always) with each other. An Arms-Length transaction ensures both the Seller and the Buyer are acting in their own best interests without pressure from one or the other.
A loan in which there is no recourse against the Guarantor other than confiscating (foreclose) the property. Typically a loan when an IRA is involved and/or multiple partners along with Commercial Lending. Please know that we offer Non-Recourse Loans.
In our opinion this is the most important document you will sign as it is the document you sign that says I promise to… A Promissory Note is a signed document/contract with a written promise to pay an agreed amount of money to a specific person and/or entity at a specified date.
Owner Occupied property
Primary Residence property
Paired with the application stage of the loan process once your lender has reviewed your Income, Assets and Credit to determine your approval status and eligibility.
The gathering and preparing of loan documentation for submission to Underwriting for Final Approval.
Real Estate Investment Association
Return On Investment, typically calculated as a % and often as a dollar figure amount
The cost to rehab & renovate a property, aka Renovation Budget
The cost to renovate & rehab a property, aka Rehab Budget
Single family residence
Scope of Work, the agreed upon renovations described by the Contractor of the work that will be performed on the property. A SOW should have milestones and reports along with a time line for the work performed.
Length/how long have these funds/money been in your account(s).
Most credit cards are unsecured as there is no collateral, in the case of Secure Credit Cards an applicant/borrower will pledge a certain amount of money upfront (as collateral) in order to obtain approval. Secure Credit Cards are most commonly obtained by those who have current or previous credit challenges as a way to not only acquire new credit but to re-establish their credit for both current and future purposes.
The sale of a property in which the sales price is less than amount owed on the current mortgage, selling a house short of its current mortgage loan balance.
Where the funds/money that are either in the subject account or being brought to closing coming from.
Similar to a Wrap-Around-Mortgage you are buying a property Subject-To the pre-existing (mortgage) financing. Said another way, you take over the already existing mortgage loan and simply transfer Title to your name.
The plot/geographical area of a property that outlines and defines its proper borders and boundaries. It is extremely important to obtain an accurate Survey as you want to ensure the property you are buying is properly defined and there are no unexpected surprises later, i.e., incorrect fence line, city encroachments, unidentified power lines and many more. Could you imagine buying a property only to find out after closing that a portion of the backyard belongs to a neighbor?
A 3rd Party service paid for at closing that protects the Buyer and Lender from any previous liens and/or judgments on Title (of the property) that would have to be paid for at a later date. These liens could range from unpaid back property taxes by the previous owner to them not paying the roofer for repairs made years ago to past due Home Owners Association bills. The last thing you want is to pay and/or deal with an expense after closing, especially one that does not belong to you.
Length/how long has the current owner been on Title of the house. Typical challenges are when the seller has owned the property for less than 90 days and wants to sell it or when the owner has owned the property for less than 180 days and wants to cash out the available equity based on the appraised value.
3 unit property
Underwriting = sign and accept liability
Deed that guarantees a clear title to the new buyer of the property.
Similar to a Subject-To (loan/financing) you are buying a property by wrapping your financing around the current owners pre-existing financing. Said another way, you take over the already existing mortgage loan and simply transfer Title to your name.