FHA Graduated Payment | 245 Mortgage Loan
The section 245 mortgage loan provides FHA insurance to households with limited income that are expecting their income to increase substantially in the next 5-10 years the ability to buy a home sooner, by making mortgage payments that start small and increase gradually over time.
The programs main purpose is to help young families who are just starting out, this creates an avenue for them to purchase a house much sooner then would otherwise be possible.
FHA Section 245 mortgage loan features:
-
Three of the five plans permit mortgage payments to increase at a rate of 2.5, 5, or 7.5 percent during the first 5 years of the loan. The other two plans permit payments to increase 2 and 3 percent annually over 10 years. The greater the rate of increase and the longer the period of increase, the lower the mortgage payments in the early years.
-
Buyers should be aware this program will cost more over the life of the loan versus a conventional loan because of the smaller payments in the early years.
-
Many closing costs can be financed into your FHA mortgage loan. With most conventional mortgages, the borrower must pay, at the time of closing, costs equivalent to 2-3 percent of the price of the mortgage loan. By allowing the borrower to finance many of these charges, the borrowers upfront costs are reduced significantly when buying a home.
-
FHA rules put limits on some of the fees charged by your lenders. For example, the mortgage origination fee charged by the lender may not exceed 1 percent of the amount of the mortgage and the tax service fee is not allowed on the 245 mortgage loan.