2 Thoughts on What is a 228 loan are they risks associated with taking out one?
  1. Reply
    steve s
    January 2, 2013 at 12:57 am

    A 2/28 loan is a mortgage that the rate is guaranteed for 2 years based on a 30-yr amortization. This is a non-conforming or otherwise known as sub-prime. These loans have a 2 yr prepay. There are lenders that will actually give a 3 yr prepay and this is what you have to watch out for. That means you must either pay a penalty after the 2nd year or stay with it when the rate changes at the end of the 2nd year.

    I usually give this type of loan program to my clients that have shakey credit and need to re-establish their credit. I counsel them in the importance of paying their bills and show them how. Before the 2 years is over I begin their refinance and get them in a better program.

  2. Reply
    January 2, 2013 at 1:42 am

    I agree with previous answer, other than the qualification that it’s only for subprime borrowers. Technically it means a hybrid adjustable loan, where the fixed period and payment are the same for the first two years. Since an adjustable rate is lower at the beginning of the term from a 30 year fixed, some people who know they are going to sell the property in a couple of years will get an adjustable loan instead of a fixed 30 year mortgage since they want to pay the least amount of cash for the period of time they are going to own the house. As long as you know what you are doing and the terms you are dealing with, there is nothing wrong about getting an adjustable loan.

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