FHA Loans for Homebuyers
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FHA Refinancing
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Need to Know
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FHA Programs for Homebuyers
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FHA Graduated Payment Mortgages
FHA Graduated Payment Mortgages (GPM) are for homebuyers who currently have low to moderate incomes but
expect their incomes to increase substantially over the next 5 to 10 years. Through this FHA loan program, also
referred to as Section 245, those who have limited incomes are able to purchase a home and make mortgage payments
that will grow along with their earning potential.
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Now is the time for an
FHA HOME LOAN
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Those who are considering using a Graduated Payment Mortgage to purchase a home should keep in mind that while
their monthly payments to principal and interest will start small, they will increase substantially each year
for up to ten years, depending upon the payment plan selected.
FHA Graduated Payment Mortgages Look To The Future
Through this and other types of FHA loan programs, FHAMortgage.com helps low and moderate-income families purchase
homes by keeping the initial costs down. By serving as an umbrella under which lenders have the confidence to
extend loans to those who may not meet conventional loan requirements. FHA mortgage insurance allows individuals to
qualify who may have been previously denied for a home loan by conventional underwriting guidelines. It also
protects lenders against loan default on mortgages for properties that include manufactured homes,
single-family and multifamily properties, and some health-related facilities.
Through the Graduated Payment Mortgage program, first time homebuyers and others with limited incomes can
tailor their monthly mortgage payments to fit their expanding incomes therefore allowing them to purchase a
home sooner than they would be able to through conventional financing programs.
Of the five FHA Graduated Payment Mortgage plans, three of them allow mortgage payments to increase at a
rate of 2.5 percent, 5 percent, or 7.5 percent in the first 5 years of the loan. Through the other two
plans, payments increase at a rate of 2 to 3 percent annually over 10 years. Beginning in the sixth year
of the 5 year plans and in the eleventh year of the 10 year plans, payments stay the same for the
remaining years of the mortgage. FHA mortgages that start with a greater rate of increase over a
longer period will have lower payments in the early years.
In most other respects, Section 245 loans are similar to basic FHA-insured single-family mortgage loans.
Down payment requirements can be low--3 percent or less--because FHA insurance allows homebuyers to finance
about 97 percent of the home's cost through their mortgage. In addition, some closing costs can be financed,
reducing up-front costs. FHA also limits some fees that lenders charge--for example, the loan origination charge.
Finally, FHA sets limits on the size of the mortgage loan that vary with the location and the number of
units in the property.
FHA GPM Availability
FHA Graduated Payment Mortgages are available to anyone who intends to use the mortgaged property as their
primary residence and who expects to have a rising income. However, the program is not open to investors.
When considering an FHA GPM, homebuyers should calculate their potential for increased income to offset the rising
mortgage payments. Recognize that over the life of this FHA mortgage, homeowners will pay more in interest than
with an FHA fixed mortgage with payments that remained the same over the life of the loan.
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to Buying a Home with an FHA Loan
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> FHA Step 1
How much can you afford?
> FHA Step 2
FHA says, "Know your rights."
> FHA Step 3
Shop for an FHA loan.
> FHA Step 4
Shop for a place to call home.
> FHA Step 5
Make an offer for the home.
> FHA Step 6
Get a home inspection.
> FHA Step 7
Your homeowners insurance.
> FHA Step 8
Sign on the dotted line and move in.
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Get a VA loan to buy a home, to build a home, to refinance your mortgage, or to simultaneously purchase and improve a home.
VA Mortgage News
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and insurance.
Pioneer Military Loans
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