BALLOON PAYMENT MORTGAGE

In the recent year, there has been an avalanche of housing foreclosure. One of the various reasons is the balloon payment mortgage. A balloon payment can trigger a foreclosure when they come due if the owner does not have the ability to refinance the property or pay off the debt. The value of the property may have deteriorated; interest rates might be too high for the owner to qualify for another loan; the owner might not be able to afford it. If the property has not appreciated as expected, the owner must sell or face foreclosure. Most prospective sellers wait until the last possible date, when it is too late, and they are foreclosed upon.

Home Inspections: Know What You're Walking Into

When a foreclosure occurs the owner can no longer afford the mortgage payment resulting in maintenance and repairs being neglected. When taking a property “subject to” from the lender, buying before the trustee sale, always have a home inspection.

The purpose of a home inspection is to provide the client with information regarding the general condition of the property, and many home buyers stipulate in the purchase contract that buying any property is contingent upon a favorable home inspection. Do not expect a home inspection to address termite issues, or cosmetic conditions. The inspection should include the foundation, basement, under floor, the interior, plumbing, and heating and cooling. It should also include, roof covering, attic area, roof framing, electrical, fireplace and chimneys. The inspection report provides written documentation of any defects. This report may include the inspector’s recommendations for correction or further solutions.


If you are purchasing the property from the bank, identifying defects gives you a chance to reason with the bank for a discount. Of course, this is not to say a home inspection is the buyer’s wish list, protocol must be observed (this is why it’s important to have a licensed home inspector, a faulty report can spell unexpected costs, or even lawsuits, later on). When taking the property “subject to” from the lender, a home Inspection gives you a better idea of what the actual fix up costs may be, as opposed to preliminary estimates you made during your math formula. This is another way to figure out what the real value of the property is.
However, be warned that not all states require certification of home inspectors. In Virginia, for instance, certification is voluntary. There are still more than 20 states that do not require an inspector to be certified. Like anything else in the program, due diligence will pay off in this respect. In 2001, Pennsylvania passed Act 114 which includes the following: home inspectors are now required to be a full member of a national, nonprofit home inspection association or be supervised by someone who is. Members must also comply with a code of conduct and attend professional education classes as a condition of membership. Until then, anyone could be a home inspector. Can you imagine the dangers of an unlicensed inspector?
The most common ways of locating a good home inspector would be to consult with family and friends. You can also speak with a real estate agent, and search the internet.

A home inspection helps you figure out what liabilities you might incur that would affect how much you could be paying out. Keep in mind that Cleo’s formula makes you the priority!