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Glossary

  1. AMORTIZATION
  2. AFTER REPAIR VALUE  (ARV)
  3. BALLOON NOTE
  4. BOUNDARY SURVEY (RESIDENTIAL PROPERTY)
  5. CONTRACTORS (GENERAL CONTRACTORS)
  6. CO-SIGNER
  7. DOUBLE CLOSING
  8. FLIPPING
  9. GEORGIA REAL ESTATE INVESTORS ASSOCIATION (GAREIA)
  10. HOUSING AND URBAN DEVELOPMENT, DEPT. OF (HUD OFFICE)
  11. HOUSING CHOICE VOUCHER PROGRAM (Section 8 Housing)
  12. HUD
  13. INTEREST ESCROW
  14. INTEREST ONLY NOTE
  15. INTERNAL REVENUE SERVICE (IRS) FEDERAL FORM 1040
  16. LANDLORD/RENTAL DWELLING INSURANCE
  17. LOAN TO VALUE (LTV)
  18. POINTS
  19. REAL ESTATE OWNED (REO)
  20. RENOVATION/BUILDERS RISK INSURANCE
  21. RENTAL INSURANCE (TENANT INSURANCE)
  22. REPAIR ESCROW
  23. SECTION 8 HOUSING (aka FEDERAL ASSISTED HOUSING)
  24. SECTION 8 HOUSING AUTHORITY (AHA)
  25. SUB-CONTRACTOR
  26. TITLE INSURANCE
  27. VACANT DWELLING (RENOVATION) INSURANCE
  28. WHOLESALER

  1. AMORTIZATION - A reduction of a debt by regular installment payments.  Our loans are interest only and therefor not amortized.   

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  2. AFTER REPAIR VALUE  (ARV) - this is the value an appraiser places on a property while taking into account several factors; the repairs the investor plans to make, current market conditions and recent sales in the immediate vicinity.  This number is what most investment lenders use when calculating Loan to Value (LTV). 

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  3. BALLOON NOTE - this is a note that matures after a predetermined amount of time and becomes due and payable at that expiration.  Most investment lenders are willing to extend this note if the investor is current with payments and the property repairs are complete.

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  4. BOUNDARY SURVEY (RESIDENTIAL PROPERTY) - a boundary survey establishes the true corners and property lines of a parcel of land.  Boundary surveys are typically performed when: purchasing/selling real estate, obtaining building permits, resolving property line disputes, or erecting fences and outbuildings.  Surveys are critical to the lender and the investor and can prevent future problems arising from unknown situations such as sewer easement and property line disputes. 

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  5. CONTRACTORS (GENERAL CONTRACTORS) these are people that perform or supervise the construction or development of a property pursuant to the terms of a primary contract with the property owner.  The general contractor may use its own employees to perform the work and/or services of other contractors called subcontractors. 

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  6. CO-SIGNER - this is an individual who signs for a loan along with the primary borrower and assumes equal liability for that loan.  This is often used when the primary borrower/investor does not have strong collateral or good credit history and the second party guarantees that the loan will be repaid if the primary borrower fails to do so. 

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  7.  DOUBLE CLOSING - The purpose of the double closing is to allow both the lender and the seller to use an attorney of their choice, who represents their interest in the transaction. The buyer will close with  their lender first in order to secure the funds to purchase the property then proceeds to the second closing with the seller to complete the transaction.

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  8. FLIPPING - This is a real estate term that often carries a negative connotation with many lenders and buyers.  In this situation, a buyer (or wholesaler) contracts to purchase a property and then sells the property to another buyer, for a profit, before actually closing on the original purchase.  This is legal to do, as long as there is full disclosure between all parties involved. This includes the original seller, the end (final) buyer, real estate agents, lenders or appraisers.

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  9. GEORGIA REAL ESTATE INVESTORS ASSOCIATION (GAREIA) - this is a local organization dedicated to the education, motivation and realization of it's members real estate goals. This particular organization offers additional resources to it's members such as a library, computer resource center, a business center and numerous planned events for their continued education. Variations of this organization can be found all across the country.

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  10. HOUSING AND URBAN DEVELOPMENT, DEPT. OF (HUD OFFICE) - The Department of Housing and Urban Development was established in 1965 to supersede the Housing and Home Finance Agency in administering the nations housing and urban development programs. It is currently the major source of financing for the development of rental housing for low and moderate income people and people with disabilities. 

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  11. HOUSING CHOICE VOUCHER PROGRAM (Section 8 Housing) - See SECTION 8 HOUSING (aka FEDERAL ASSISTED HOUSING) above. 

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  12. HUD OR HUD 1- often referred to in the lending industry as a settlement statement.  A HUD1 is a statement which the title company or authorized attorney provides the borrower at the time of closing which details the costs associated with the loan. 

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  13. INTEREST ESCROW - this is money held by an investment lender for monthly interest payments due from the borrower.  This prevents the borrower from making monthly payments and ensures payments are made on time to the lender. 

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  14. INTEREST ONLY NOTE - this is a type of loan note that requires the borrower to pay the interest portion of his monthly payment to the lender however,  does not reduce the principal balance of the loan/note.  The full loan amount would be due upon the expiration of the term along with any unpaid interest and penalties.  Most investment loans are structured as interest only notes.

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  15. INTERNAL REVENUE SERVICE (IRS) FEDERAL FORM 1040 - this tax form is used by a taxpayer for reporting income to the US Federal Government.  It comes in several formats (S short form, telefile, etc.) but is often referred to as your annual tax return.  This tax form is required by most lenders to provide proof of income and proof that the taxpayer is paying the government for taxes on wages and interest earned. 

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  16. LANDLORD/RENTAL DWELLING INSURANCE - this is a type of hazard insurance policy that protects the landlord/owner from losses to the property structure and in some cases loss of rental income due to no fault on his/her part (i.e. wind damage to roof or glass breakage, etc.).  It does not cover the tenants personal property and most landlords suggest that tenants get a tenant rental policy for their protection. 

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  17. LOAN TO VALUE (LTV) - This percentage is derived when the purchase price of the property is divided by the After Repair Value.  Most investment lenders use a percentage between 65 and 70 percent.

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  18. POINTS - this is the amount a lender charges for funding the loan to an investor; typically it is a percentage of the total loan amount and is required to be paid at closing. 

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  19. REAL ESTATE OWNED (REO) - this is property that has been foreclosed on, did not sell at the courthouse steps and is now being sold by the lender. (normally a bank or HUD office). 

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  20. RENOVATION/BUILDERS RISK INSURANCE - this is a type of hazard insurance policy that protects the investor/owner while the property is under renovation and vacant.  Vacant properties are known targets for thieves and vagrants. These are special types of insurance coverage and are only underwritten by select companies in the market place. 

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  21. RENTAL INSURANCE (TENANT INSURANCE) - this is a type of insurance policy that protects the renter's personal property from loss due to fire, theft or slips and falls, etc. This type of policy does not protect the property owner's structure, only the renter's contents. 

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  22. REPAIR ESCROW - this is money held by an investment lender for reimbursement to the investor/owner for repairs completed on the property.  Most often the repairs are inspected by the lender and funds are issued after the inspection takes place. 

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  23. SECTION 8 HOUSING (aka FEDERAL ASSISTED HOUSING) - In the United States, the Federal Government funds two housing assistance programs; public housing and Section 8 housing.  These programs are available to families and individuals with financial need.  We will deal with Section 8 Housing in this glossary. Formerly and  most commonly known as Section 8, the Housing Choice Voucher Program provides very low income families with the opportunity to rent safe, privately-owned apartments or houses.  Recipients of these Section 8 vouchers rent directly from the landlord or management company rather than the government as they do with public housing. 

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  24. SECTION 8 HOUSING AUTHORITY (AHA) - Atlanta Housing Authority is organized under Georgia law to develop, acquire, lease and operate affordable housing for low-income families.  Today, AHA is the largest housing agency in Georgia and one of the largest in the nation, serving approximately 50,000 people. 

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  25. SUB-CONTRACTORS - this is an individual or a business that signs a contract to perform part or all of the obligations of a general contractor. 

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  26. TITLE INSURANCE - INVESTOR POLICY AND LENDER POLICY - the investor's policy, usually issued by a title company, insures a home buyer against errors and omissions in the title search.  The cost of the policy is usually a function of the value of the property, and is often paid for by the borrower.  The lender's policy, also issued by a title company, insures the lender against loss resulting from any defects in the title or claims against a property that were not uncovered in the title search.   

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  27. VACANT DWELLING (RENOVATION) INSURANCE - Is obtained once the repairs are complete and the property remains uninhabited.

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  28. WHOLESALER - This is a person or company who specializes in locating, evaluating and securing properties for the purpose of reselling to the investor market for a profit.  The properties are obtained through various avenues such as bank foreclosure, courthouse tax lien sales and distressed owners. The are often bought at substantially lower prices due to the amount of repairs needed.