Acronyms, jargon, and terms explained in plain English.
A tax-deferred swap of one investment property for another. Allows you to defer capital gains taxes when you sell a property and reinvest the proceeds into a similar property.
A secondary housing unit on a single-family lot, like a backyard cottage, garage apartment, or basement conversion. Bellingham allows ADUs in most residential zones.
A professional assessment of a property's market value, typically required by the lender before approving a mortgage. The appraiser compares the home to recent sales of similar properties.
The total yearly cost of your loan, including interest and fees. APR is usually higher than the interest rate alone because it includes lender charges.
A measure of an investment property's return: net operating income divided by purchase price. A 6% cap rate means you'd earn 6% of the property's value per year before debt service.
The annual pre-tax cash flow from a rental property divided by the total cash you invested. Unlike cap rate, this accounts for your mortgage. It measures return on your actual cash outlay.
Fees paid at the end of the transaction, typically 2–5% of the purchase price. Includes lender fees, title insurance, escrow, recording fees, and prepaid items like property taxes.
A report prepared by your agent that compares your property to similar recently sold homes in the area. Used to determine a competitive listing price or to evaluate an offer.
A condition written into a purchase offer that must be met for the sale to go through. Common contingencies include financing, home inspection, and appraisal.
A standalone secondary dwelling on a single-family lot, essentially a backyard cottage. Bellingham adopted regulations for DADUs to help address housing density.
Your total mortgage payment including principal and interest. When analyzing investment properties, debt service is subtracted from net operating income to determine cash flow.
The percentage of your gross monthly income that goes toward debt payments. Lenders use DTI to determine how much you can afford to borrow. Most require DTI under 43%.
A good-faith deposit (usually 1–3% of the offer price) submitted with your purchase offer. Shows the seller you're serious. Held in escrow and applied to your down payment at closing.
A clause in your offer that automatically increases your bid by a set amount above competing offers, up to a maximum price. Common in competitive markets like Bellingham.
A neutral third-party account that holds funds and documents during the transaction. Also refers to the monthly account your lender maintains for property taxes and insurance.
A Washington State tax on the sale of real property. Rates vary by sale price, roughly 1.1–3% depending on the amount. Typically paid by the seller.
A government agency that insures mortgages made by approved lenders. FHA loans allow down payments as low as 3.5% and credit scores as low as 580, making them popular with first-time buyers.
An organization in a subdivision or condo that makes and enforces rules, maintains common areas, and collects monthly or annual dues from homeowners.
Buying a multi-unit property, living in one unit, and renting the others. The rental income offsets your mortgage, sometimes covering it entirely. A common entry point for new investors.
The system that allows real estate websites to display MLS listing data. When you search homes on our site, IDX is the technology pulling in those listings.
A clause giving the buyer the right to have the property professionally inspected within a set period (usually 10 days). If major issues are found, you can negotiate repairs or walk away.
The loan amount as a percentage of the home's appraised value. An LTV of 80% means you're borrowing 80% and putting 20% down. Higher LTV usually means you'll pay PMI.
Insurance required on FHA loans, similar to PMI on conventional loans. Includes an upfront premium (1.75% of loan amount) and an annual premium paid monthly.
A database used by real estate agents to share property listings. When your home is "on the MLS," it's visible to every agent and buyer searching in that market.
Total rental income minus operating expenses (taxes, insurance, maintenance, management, vacancy) but before mortgage payments. The key number for evaluating investment property profitability.
Insurance required by lenders when your down payment is less than 20%. Protects the lender if you default. Typically $50–$200/month and can be removed once you reach 20% equity.
Fees paid upfront to your lender at closing to lower your interest rate. One point = 1% of the loan amount. Buying points makes sense if you plan to stay in the home long enough to recoup the cost.
A letter from a lender confirming they've reviewed your finances and will lend you up to a specific amount. Stronger than pre-qualification. In Bellingham's market, sellers often require pre-approval before considering offers.
A form required by Washington State law where the seller discloses known issues with the property (structural, plumbing, electrical, environmental, etc.). Buyers should review this carefully.
A furnished rental offered for stays under 30 days (think Airbnb/VRBO). Bellingham has specific regulations for STRs including licensing requirements and zone restrictions.
Insurance that protects the buyer and lender against claims on the property's ownership history: liens, disputes, recording errors. Required by most lenders and purchased at closing.
A review of public records to confirm the seller legally owns the property and there are no outstanding liens, easements, or claims. Done by a title company before closing.
The process where a lender evaluates your financial profile (income, credit, assets, debts) to decide whether to approve your mortgage application and on what terms.
Guarantees home loans for eligible veterans and active-duty service members. VA loans require no down payment, no PMI, and offer competitive rates.
The percentage of time a rental property sits empty. A lower vacancy rate means more consistent income. Bellingham's rental vacancy rate is typically below the national average due to WWU and regional demand.