What is a Balloon Mortgage?
A Balloon Mortgage is a loan over a shorter period of time then normal, for a given amount of money. If you want a 25 year loan, and the lender wants it in 10 years, the payments would be outrageous. A balloon mortgage is one where you would pay off the loan at a lower amount (like you're paying 25 year loan payments) in a shorter amount of time. (Like 10 years) At the end of the loan period, the remainder of the loan would immediately be due in full, or you will be foreclosed.
The idea is that you will have your life straightened out by then, and you will be able to place a regular mortgage with another institution by the time the lump sum is due.