Section 245 Graduated Payment Mortgage Program
Program allows homeowners to make smaller monthly payments initially and to increase their size gradually over time.
The Department of Housing and Urban Development's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. HUD fulfills this mission through high ethical standards, management and accountability, and by forming partnerships with community organizations.
See Catalog Address Appendix IV for a list of Offices.
Program Accomplishments
No Graduated Payment Mortgage loans were made in 2007.
Uses and Use Restrictions
HUD insures lenders against loss on mortgage loans.
These mortgage loans may be used by owner-occupant mortgagors to finance the purchase of proposed, under construction, or existing single family housing, and condominiums.
Maximum insurable mortgage is the property's sales price (or appraised value, if less)exclusive of any borrower paid closing cost multiplied by a percent that is determined by the sales price or value if less and the average closing cost for the State or 97 percent of the appraised value and closing costs of the property, minus all of the deferred interest which would accrue during the graduated term.
This determines the maximum mortgage that FHA will insure, provided the mortgagor makes a cash investment of at least 3 percent into the property which may include closing costs.
Eligibility Requirements
Applicant Eligibility
All persons intending to occupy the property are eligible to apply for Section 245(a).
Beneficiary Eligibility
Individuals/families.
Credentials/Documentation
Documentation regarding the characteristics of the property and the qualifications of the applicant are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.
Aplication and Award Process
Preapplication Coordination
Application conference with the mortgage lender submitting the application is suggested.
This program is excluded from coverage under OMB Circular No.
A-102.
This program is excluded from coverage under E.O.
12372.
Application Procedures
Applications are submitted for review and approval or disapproval to the local HUD Field Office through a HUD-approved lending institution. This program is excluded from coverage under OMB Circular No. A-110.
Award Procedures
See Application Procedure.
Deadlines
None.
Authorization
National Housing Act of 1934, Section 245, Public Law 73-479; Housing and Community Development Act of 1974, Section 308, Public Law 93-383, as amended; Housing and Community Development Amendments of 1979, Section 245(b).
Range of Approval/Disapproval Time
Varies.
Appeals
HUD will state the reasons for refusing an application. The applicant may reapply subject to concurrence of the lender.
Renewals
None.
Assistance Considerations
Formula and Matching Requirements
Formula and Matching Requirements: Formula and Matching Requirements: For most families, the maximum amount of the loan is the property's sales price (or appraised value, if less) exclusive of any borrower paid closing cost multiplied by a percent that is determined by the sales price or value, if less and the average closing cost for the State. This determines the maximum mortgage that FHA will insure, provided the mortgagor makes a cash investment of at least 3 percent into the property, which may include closing costs. The downpayment is the difference between the maximum loan amount and the purchase price of the home. In addition to the downpayment, the purchaser must pay for all items of prepaid expense. Risk based premiums are collected including (1) an upfront premium that may be financed and (2) a periodic premium that is paid monthly. The loan origination charge by the mortgagee varies, but may not exceed one percent of the total mortgage (minus the mortgage insurance premium, if being financed). Mortgagors may be charged appraisal and inspection fees in accordance with fee schedules established by HUD.
Length and Time Phasing of Assistance
The term of the mortgage is limited to 30 years.
Post Assistance Requirements
Reports
Defaults in meeting the mortgage terms must be reported.
All approved mortgagees at any time upon request by HUD must furnish a copy of their latest financial statement.
Audits
HUD reserves the right to audit the account of the mortgagee to determine its compliance and conformance with HUD regulations and standards.
Records
Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the HUD regulations.
Financial Information
Account Identification
86-4587-0-3-371.
Obigations
(Mortgages insured) Reported under program 14.117.
Range and Average of Financial Assistance
See Uses and Use Restrictions.
Regulations, Guidelines, and Literature
"Move in...With A Graduated Payment Mortgage", no charge; "Lending and Selling With A Graduated Payment Mortgage", no charge; 24 CFR 203.45; HUD Handbook 4240.2, no charge.
Information Contacts
Regional or Local Office
Persons are encouraged to contact the Homeownership Center serving their State, or the nearest local HUD Office. See Catalog Address Appendix IV for a list of Offices.
Headquarters Office
None.
Criteria for Selecting Proposals
Not applicable.
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