2/28 arm with balloon?

Question

Ok now I know Im new to this and this is my first house but I feel it says sucker on my forhead. I am sitting at my computer with a loan that says 2/28 arm but it also says that at the end of thirty years I pay a balloon payment of $165,000. Now the houst that I am buying is only $230,000. So first question should I have the house paid for after thirty year. And second question is this house really worth 1,000,000. Is this all normal and Im just sweatting the normal stuff or am I really getting raked over the coals like I think I am. Granted my credit isnt great but that is what Im trying to work on. PLease anyone out there with a clue help me on this

Answer 1

This is indeed a band aid loan for someone with bad/poor credit. Sounds like you have not closed yet and I highly recommend shopping for a second quote. Balloon payments are becoming more and more uncommon and even in some states illegal. You need to contact a Mortgage Broker as they typical have hundreds of lenders who will compete for your loan and their business. Take what you can get for now and work on your credit score while the interest rate is locked and then refinance into a 30 or 40 year fixed. If you try for a 30 or 40 year fixed now the rates will be astronomically high and not worth it and you may not qualify as your debt to income ratio might be over 50%. To answer your last question is the house really worth 1,000,000 of course not but its the cost of doing business with a lenders money. I hope this helps ease your mind but if you have any questions or need help email me [e-mail].

Answer 2

You are getting ripped off. Refinance as soon as possible. First of all a 2/28 arm is an adjustable rate mortgage. You probally took it cause the rate looked attractive. This is a dangerous type of rate to have with todays economy. The Fed has and will continue to raise the prime rate to control inflation and this means your rate will contiue to rise causing higher and higher monthly payments. I wouldn't worry about the balloon payment because unless ur crazy you wont keep the same mortgage that long. You generally can refinance every 6 months depending on house appreciation and your debt ratio. When you can refinance I recomend taking a fixed rate even if it is on the high side (due to poor credit). With a fixed rate you at least have a clear picture of how your loan principle is decreasing and you can gurantee that anything you pay over your monthly payment goes directly towards reducing principle. The Arm you are in now puts you on a financial rollercoaster and if you are trying to improve your credit the last thing you want to happen is to fall behind on mortgage payments due to a bad ecoomy. Hope this makes sense. Good luck

Answer 3

Ouch - First off - One person stated to refinance quickly - WAIT - you will have a pre-payment pentality.....so you will have to wait the 2 years (if you have not already closed yet, go to another Broker, and get out of your terms now) If you have a pp(pre-payment), it will be anywhere from 3 percent or 2 percent of your loan amount...that adds up...Your rate on a 2/28 is a fixed rate for 2 years, than it will adjust up... If you have closed already. Look at YOUR mortgage and your NOTE...that will tell you the date/year your payments go up - ok.

Normally a person does not stay in their home more than 7 years (or so the censes states), but I have been in mine since 1992...Depends on what you want to do in the future...But you do need a Fixed rate....Work on your credit - Something else to consider....

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.

Answer 4

It sounds like you are in a loan that is amortized over a 40 year term but is due in full in 30 years. This type of loan is usually done when your debt to income is too high on a regular 30 year. Take the 2 years your loan is fixed for and work on getting your credit straightened out. Then refinance into a fixed rate. I call these band-aid loans for people who want to buy a house but credit is less than desirable to most banks. If you work on your credit this will turn out well for you.

Answer 5

you REALLY should have someone unbiased and knowledgeable look this over for you. It might be normal or a major SCAM. contact me if you'd like and I can look it over for you