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GPM Calculator
How to Use

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 Information by State
 Print version
The Graduated Payment Mortgage (GPM). Section 245(a)program makes it possible to have lower payments during the initial term of the loan with annual increases of principal, interest and mortgage insurance.

You may download a simple DOS calculator to help compute the monthly installment of principal and interest, and annual mortgage insurance premiums for GPM loans with a mortgage insurance premium
rate of one-half of one percent. Click on download, save the file to your local drive and double-click on the saved file to run the program. You must have your printer online to run this program. The results will
automatically print.

The program is available only for owner occupants (no investors, nonprofits or governmental units) and only on one-unit properties. The program, because of negative amortization during the early years of the mortgage, results in a higher principal balance after 5 or 10 years (depending on the plan chosen) than at the time the mortgage was made. It is a program best suited for those borrowers who have a high likelihood of income growth and where property values are likely to increase.

The mortgage calculation requires consideration of three limits, the least of which determines the maximum mortgage: 1) The statutory limit for the area; 2) the maximum mortgage as if the loan were to be insured under either Section 203(b) (or Sec. 234 if the property is a condominium) using outstanding instructions, and, 3) a separate calculation specific to Sec. 245(a). This final calculation will almost always result in a lower amount than would be available under Section 203(b) or 234(c), as appropriate. The Section 245(a) calculation is to make certain that the loan amount with all deferred interest added does not exceed 97 percent of the appraised value including closing costs at the time the loan was made.

Below is an example of the mortgage calculation:

Sales Price of $100,000 and Borrower Paid Closing Costs of $2500. Property is existing construction over one year old. The interest rate is 8.00% and Plan III with increasing payments for 5 years at 7.50% each year was selected.

After computing the maximum mortgage under Section 203(b), separately compute the Section 245(a) loan amount. The Section 245(a) calculation still permits the inclusion of closing costs into the equation.

$100,000 Sales Price
$2,500 Closing Costs
$102,500 Acquisition Cost
x97% Multiply Acquisition Cost by 97%
$99,425 97% of Acquisition
/1.0309556 High Balance Factor from Calculator
$96,439 Maximum Mortgage Amount for Sec. 245(a) exclusive of UFMIP 
$98,608 Mortgage Amount including UFMIP
5.5101 Monthly Payment Factor (applied to mortgage amount)
$543.35 Monthly Principal and Interest during 1st year. 

Additional Information on Section 245(a) loans:

 -   The lender must use the high balance factor, the mortgage payment factor, and annual mortgage insurance premium factors from the calculator or obtained separately from HUD Handbook 4240.2 available through HUDCLIPS on the web.

 -   Section 245(a) is pursuant to either Section 203(b) or Section 234(c). Therefore, those Section 245(a) mortgages under Section 203(b) will have both an upfront mortgage insurance premium and an annual premium collected for either 7, 12 , or 30 years depending on the initial loan-to-value as shown on formHUD-92900-PUR, line 16a. On condominiums, the monthly MIP is collected for the life of the loan. In all cases, the amount collected is based on the Section 245(a) mortgage insurance premium factors (and applied to the mortgage amount before adding any UFMIP if required).

 -   Lenders must include the certification and disclosure described in Chapter 1 of the GPM handbook (4240.2). This disclosure provides information to the homebuyer as to the principal and interest and mortgage insurance increases during the early years of the mortgage, and the date in which these payments become level for the remaining term of the mortgage.

 -   There are five separate GPM plans available. Please note that Section 245(b) is no longer available.

 -   Credit qualifying assumption are permitted as in all other programs. The servicing lender must provide the disclosure regarding any increases to the monthly payment due to the deferred interest associated with the GPM program.

 -   If computation of the Section 203(b) maximum loan amount results in a lower loan limit than Section 245(a), (for example, on a property less than one year old without prior approval and no ten-year warranty), the lower Section 203(b) limit must be used for the loan amount. P & I mortgage insurance factors from the Section 245(a) calculator or handbook are applied to the lower amount.

 -   ADP codes for Section 245(a) loans are 770 (if under Section 203(b) or 771 (if under Section 234(c)).

 -   Handbook 4165.1 REV-1 contains model mortgage forms for the GPM program.



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