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.
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
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.
mortgage calculation requires consideration of three limits, the
least of which determines the maximum mortgage: 1)
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.
is an example of the mortgage calculation:
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.
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.
Multiply Acquisition Cost by 97%
97% of Acquisition
High Balance Factor from Calculator
Maximum Mortgage Amount for Sec. 245(a) exclusive of UFMIP
Mortgage Amount including UFMIP
Monthly Payment Factor (applied to mortgage amount)
Monthly Principal and Interest during 1st year.
Information on Section 245(a) loans:
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. |
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).|
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.|
are five separate GPM plans available. Please note that Section
245(b) is no longer available.|
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.|
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
codes for Section 245(a) loans are 770 (if under Section 203(b)
or 771 (if under Section 234(c)).|
REV-1 contains model mortgage forms for the GPM program.