|
Saint Paul Regional Office
Regional Loan Center
|
Loan Types
| Traditional Fixed Payment Mortgage
|
| This type of mortgage loan calls for equal monthly payments for the life or term of the loan. Each monthly payment reduces a certain portion of the principal owed on the loan and pays interest accrued to date. VA does not require a down payment if the purchase price or cost is not more than the reasonable value of the property as determined by VA, but the lender may require one. If the purchase price or cost is more than the reasonable value, the difference must be paid in cash from your own resources.
|
| ARM (Adjustable Rate Mortgage)
|
| With this type of home loan the interest rate is changed periodically based on a standard financial index. Most ARMs have caps on how much an interest rate may increase. Generally the interest rate is fixed for the first several years (three to five years) and is adjusted every year after.
|
| GPM (Graduated Payment Mortgage)
|
| This repayment plan provides smaller than normal monthly payments for the first few years (usually five years), which gradually increase each year and level off after the end of the "graduation period" to larger than normal payments for the remaining term of the loan. The reduction in the monthly payment in the early years of the loan is accomplished by delaying a portion of the interest due on the loan each month and by adding that interest to the principal balance. The maximum loan amount may not be for more than the reasonable value of the property or the purchase price, whichever is less. Because the loan balance will be increasing during the first years of the loans a down payment is required to keep the loan balance from going over the reasonable value or the purchase price.
|
| Buydowns
|
| The builder of a new home or seller of an existing home may buy down the veteran's mortgage payments by making a large lump sum payment up front at closing that will be used to supplement the monthly payments for a certain period, usually one to three years.
|
| GEM (Growing Equity Mortgage)
|
| This repayment plan provides for a gradual annual increase in the monthly payments with all of the increase applied to the principal balance. The annual increases in the monthly payment may be fixed (for example, 3 % per year) or tied to an appropriate index. The increases to the monthly payment result in an early payoff of the loan in about eleven to sixteen years for a typical 30 year mortgage.
|
|
|
|
|
| Reviewed/Updated Date: October 7, 2008 |
|
