e. How to Calculate Monthly Installments

Perform the necessary calculations using 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.

Note: These tables are available on diskette to lenders through HUD offices.

Determine the monthly installment amounts as follows:

Number of thousands of dollars in the original loan amount (including the VA funding fee, if financed, and the cost of any energy efficiency improvements)

x

Monthly installment factor per $1,000 of original loan proceeds for the particular interest rate from the HUD tables (Different factors are

provided for each of years 1 through 5, and year 6 and beyond.)

f. APR Calculation

HUD’s GPM Annual Percentage Rate (APR) tables may not be used for VA purposes because they include an adjustment for the HUD mortgage insurance premium.

g. Underwriting Considerations

If there are strong indications that the applicant’s income can reasonably be expected to keep pace with the increases in the monthly mortgage payment

then

·   analyze the adequacy of the applicant’s income, and

·   complete VA Form 26-6393, Loan Analysis, using only the first year’s mortgage payment in monthly shelter expenses.

However, if such strong indications are absent then

·   analyze the adequacy of the applicant’s income, and

·   complete VA Form 26-6393, Loan Analysis, using the payment which would apply if the loan was under the standard amortization plan.

The lower initial payments of the GPM can be considered a compensating factor, if appropriate.