Real estate loan eases borrower qualifications

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"I was told that the only way I could qualify for the loan I wanted was with a GPM. What is that?" GPM stands for "graduated payment mortgage," meaning a mortgage on which the payment starts low and rises over time. Since the initial payment is used to qualify the borrower, the GPM may allow a borrower to qualify who would not qualify with a standard fixed-rate mortgage (FRM). For example, the mortgage payment on a $200,000 FRM for 30 years at 6 percent is $1,199. Stretched over 40 years, the payment would be $1,100. But the initial payment on a 30-year GPM at 6.5 percent, on which the payment rises by 7.5 percent a year for five years, is only $941. The interest rate on the GPM is fixed, just as it is on a standard FRM. The quid pro quo for the low initial payment is a larger payment later on. The payment on the GPM rises for five consecutive years, reaching $1,351 in month 61, where it stays for the remainder of the term. The initial payment on a GPM does not cover the interest...