mortgages and loans

Initially introduced by the Federal Housing Administration (FHA), the graduated payment mortgage (GPM) has lost much of its popularity. However, related programs have been developed to better apply the GPM’s basic objective.
The GPM was designed for borrowers and home buyers who anticipated future increases in their income. This program allowed such applicants to qualify for a larger mortgage loan and, thus, a bigger home purchase.
The most common program with a similar objective today is the Temporary Buy-Down program, which lowers the interest rates during the first one-to-three years of the loan. The applicant would then be qualified and underwritten based on the lower interest rate and monthly payment of the first year.
However, unlike the Buy-Down program, the GPM loan lowered the monthly payment but not the interest rate. Instead the GPM adjusts the monthly payments so that the borrower pays slightly less during the first years but slightly more in later years.