What does a loan refer to in real estate?

In real estate, a loan specifically refers to a sum of borrowed money that an individual or entity obtains for the purpose of purchasing property. This borrowed amount is not given freely, as it must be repaid over time, typically with interest. Loans are essential in real estate transactions, enabling buyers to afford properties that they might not have the immediate cash to purchase outright.

When someone takes out a loan for a property, they enter into an agreement with a lender, which could be a bank, credit union, or other financial institution. The borrower promises to repay the loan amount along with interest according to the terms specified in the loan agreement. This process is common in real estate transactions, as it facilitates homeownership and investment in properties by allowing individuals to leverage their finances.

The other options describe different aspects of real estate but do not align with the definition of a loan. A rental agreement pertains to the leasing of property, investing in property refers to buying with the expectation of generating profit, and a purchase agreement is a legal contract outlining the terms of selling or buying real estate. None of these convey the borrowing nature of a loan.