READ THE FINE PRINT! READ THE FINE PRINT! READ THE FINE PRINT! READ THE FINE PRINT! Got it? Good.
I have a client who wants my help, after having received a mortgage through another bank one year ago. He has been thinking he had a 3/1 ARM on his 2nd trust. A 3/1 ARM is when you have a fixed rate for the first 3 years of the mortgage, and then it adjusts annually thereafter. But, what he really has is a 1 Year Balloon! This is odd because I have never heard of a 1 Year Balloon, ever, in almost 25 years in the business. But now the client is faced with a loan that has matured (i.e. ballooned) and the bank wants their money! The bank wants my client to pay the entire 2nd trust off, which is a large amount.
Now I am helping the client negotiate a solution with the bank, because he does not have the cash to payoff the 2nd trust, and the home has gone down in value, so we cannot get anyone to refinance it to payoff the current bank because there is very little equity.
A good broker would have never allowed a client to get into a 1 Year Balloon from the start, and also would have stayed on top of the client’s financing they helped with in the first place to offer solutions and alternative financing in the future, when appropriate.
It appears some banks and mortgage professionals are still OK with doing whatever type of loan helps get the borrower in the house, without thinking about the long term viability of the financing and its affects on the home buyer.
READ THE FINE PRINT, and always try and deal with an experienced mortgage professional, who asks a lot of questions, and has your best interests at heart.