b. Acceptable Use of GPMs (continued)

A GPM may be used only to acquire a single-family dwelling unit (but not a manufactured home) and can include funds for energy efficiency improvements.

A GPM may not be used for a refinancing loan, for alteration, repair, or improvement only purposes, or to acquire a multiple unit dwelling.

c. Maximum Loan Amount and Down Payment Required

Existing properties:

The principal amount of the loan may never exceed the initial reasonable value of the property (that is, the value indicated on the [ ] NOV used for loan closing). 

·   Since the principal balance increases during the initial years of the loan, a loan made for the full amount of reasonable value would violate this provision. 

·   Therefore, a down payment is required to keep the principal balance from ever exceeding the initial reasonable value of the property.

To calculate the maximum initial loan amount and the required down payment, use HUD tables for Plan III Section 245 GPMs showing outstanding principal balance factors and monthly installment amounts per $1,000 of original loan proceeds.  The factors vary according to the interest rate on the loan.

·   These tables are available on diskette through HUD offices.

Determine the maximum initial loan amount as follows:

Initial reasonable value of the property

÷

Highest outstanding principal balance factor per $1,000 of original loan proceeds for the particular interest rate (from the HUD tables)

x

1,000

The difference between this maximum initial loan amount and the initial reasonable value of the property is the amount of down payment required.