When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. These are sometimes used to qualify borrowers for a loan amount that they would not otherwise qualify for but will be able to pay in subsequent years as their income increases.
A real estate loan with a lien (i.e., mortgage or deed of trust) on the subject property that has priority over any subsequently lien or financial encumbrances.
|Graduated Payment Mortgage (GPM)|
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
Underwriting involves an analysis of the borrower's creditworthiness (debts and assets, employment history, property evaluation, and other factors to determine an appropriate rate, term & loan amount.