Resource Center & Glossary

A tax-deferred exchange under Section 1031 of the Internal Revenue Code that allows real estate investors to defer capital gains taxes by reinvesting proceeds from a sold property into a like-kind replacement property.

A mortgage loan with an interest rate that changes periodically based on a specified index. ARMs typically have an initial fixed-rate period followed by adjustable periods.

The gradual repayment of a mortgage loan through scheduled periodic payments that cover both principal and interest over a set term.

The annual cost of a loan expressed as a percentage, including the interest rate and certain fees. APR provides a more complete picture of borrowing costs than the interest rate alone.

A professional estimate of a property's market value, conducted by a licensed appraiser. Lenders require appraisals to ensure the property value supports the loan amount.

An investing strategy: Buy, Rehab, Rent, Refinance, Repeat. Investors purchase distressed properties, renovate them, rent them out, refinance based on improved value, and repeat the process.

The capitalization rate, calculated as Net Operating Income divided by property value. Cap rate is a key metric for comparing investment property returns.

A refinancing transaction in which the borrower receives a new loan that is larger than the existing mortgage, with the difference paid to the borrower in cash.

Fees and expenses paid at the closing of a real estate transaction, typically including lender fees, title insurance, appraisal, and government recording charges.

The percentage of a borrower's monthly gross income that goes toward debt payments, including the proposed mortgage. Lenders use DTI to assess borrowing capacity.

The portion of the purchase price paid by the buyer in cash, not financed by the mortgage loan. Down payment requirements vary by loan program.

A ratio used in commercial and non-QM lending that measures a property's ability to generate enough rental income to cover its debt obligations. DSCR = Net Operating Income / Annual Debt Service.

A deposit made by a buyer to demonstrate serious intent to purchase a property. Earnest money is typically held in escrow and applied toward the purchase at closing.

The difference between a property's current market value and the outstanding balance of all liens on the property. Home equity increases as the property appreciates or the mortgage balance decreases.

A mortgage insured by the Federal Housing Administration. FHA loans allow down payments as low as 3.5% and have more flexible credit requirements than conventional loans.

A mortgage loan with an interest rate that remains constant for the entire term of the loan, typically 15 or 30 years.

A revolving line of credit secured by the borrower's home equity. HELOCs allow borrowers to draw funds as needed during a draw period, with interest charged only on the amount used.

A mortgage loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Jumbo loans typically have stricter qualification requirements.

The ratio of the loan amount to the appraised value of the property. LTV is a key factor in mortgage qualification and mortgage insurance requirements.

Insurance that protects the lender if the borrower defaults on the loan. Private mortgage insurance (PMI) is typically required on conventional loans with LTV above 80%.

A property's gross rental income minus operating expenses, excluding debt service and depreciation. NOI is a fundamental metric in real estate investment analysis.

A non-qualified mortgage loan that does not meet the Consumer Financial Protection Bureau's Qualified Mortgage definition. Non-QM loans offer flexible qualification for self-employed borrowers and investors.

A lender's conditional commitment to provide a mortgage up to a specified amount, based on a review of the borrower's credit, income, and assets. Pre-approval strengthens a buyer's offer.

The original amount borrowed on a loan, or the remaining balance excluding interest. Each mortgage payment covers both principal and interest.

The process of replacing an existing mortgage with a new loan, typically to obtain a lower interest rate, change the loan term, or access home equity.

Insurance that protects against losses from defects in the title to real property. Title insurance is typically required by lenders and recommended for buyers.

The process by which a lender evaluates a loan application to determine whether to approve the loan and under what terms. Underwriting assesses credit, income, assets, and property value.

A mortgage loan guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. VA loans require no down payment and no mortgage insurance.