Finance
A 'graduated payment mortgage' (GPM) in Pennsylvania is designed for borrowers who expect:
ADeclining income over time
BRising income — payments start lower and increase over time✓ Correct
CFixed income throughout the loan term
DImmediate full repayment capability
Explanation
A GPM starts with lower monthly payments that increase on a scheduled basis over the first few years before leveling off. This design matches borrowers who have lower current income but expect rising earnings (young professionals, recent graduates).
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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