Section 245 Graduated Payment Mortgage Program


To facilitate early home ownership for households that expect their incomes to rise. Program allows homeowners to make smaller monthly payments initially and to increase their size gradually over time.

General information about this opportunity
Last Known Status
Deleted 04/02/2020 (Archived.)
Program Number
Federal Agency/Office
Agency: Department of Housing and Urban Development
Office: Office of Housing-Federal Housing Commissioner
Type(s) of Assistance Offered
Program Accomplishments
Not Applicable.
National Housing Act.
Who is eligible to apply/benefit from this assistance?
Applicant Eligibility
All persons intending to occupy the property are eligible to apply for Section 245(a).
Beneficiary Eligibility
Documentation regarding the characteristics of the property and the qualifications of the applicant are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under 2 CFR 200, Subpart E - Cost Principles.
What is the process for applying and being award this assistance?
Pre-Application Procedure
Preapplication coordination is required. Environmental impact information is not required for this program. This program is excluded from coverage under E.O. 12372.
Application Procedure
This program is excluded from coverage under 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Applications are submitted for review and approval or disapproval to the local HUD Field Office through a HUD-approved lending institution.
Award Procedure
See Application Procedure.
Not Applicable.
Approval/Disapproval Decision Time
The lender will state the reasons for refusing an application. The applicant may reapply to other lenders.
Not Applicable.
How are proposals selected?
Not Applicable.
How may assistance be used?
HUD insures lenders against loss on mortgage loans. These mortgage loans may be used by owner-occupant mortgagors to finance the purchase of proposed, under construction, or existing single family housing, and condominiums. The mortgage calculation requires consideration of three limits, the least of which determines the maximum mortgage: 1) the statutory limit for the area; 2) the maximum mortgage as if the loan were to be insured under Section 203(b) using outstanding instructions, and, 3) a separate calculation specific to Sec. 245(a). This final calculation will almost always result in a lower amount than would be available under Section 203(b). The Section 245(a) calculation is to make certain that the loan amount with all deferred interest added does not exceed 97 percent of the appraised value including closing costs at the time the loan was made.
What are the requirements after being awarded this opportunity?
Not Applicable.
Not Applicable.
Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the HUD regulations.
Other Assistance Considerations
Formula and Matching Requirements
Statutory formulas are not applicable to this program.
Matching requirements are not applicable to this program.
MOE requirements are not applicable to this program.
Length and Time Phasing of Assistance
The term of the mortgage is limited to 30 years. Method of awarding/releasing assistance: quarterly.
Who do I contact about this opportunity?
Regional or Local Office
None. Persons are encouraged to contact the Homeownership Center serving their State, or the nearest local HUD Office. Visit for a list of offices.
Headquarters Office
Wanda L. Sampedro 451 7th Street, SW, Washington, District of Columbia 20410 Email: Phone: (800) 225-5342
Website Address
Financial Information
Account Identification
(Sale, Exchange, or Donation of Property and Goods) FY 14 Not Separately Identifiable(Exp: Reported under 14.117); FY 15 Not Separately Identifiable(Exp: Reported under 14.117); and FY 16 Not Separately Identifiable(Exp: Reported under 14.117) - Reported under 14.117 for Fiscal Years 2009 through present.
Range and Average of Financial Assistance
No Data Available.
Regulations, Guidelines and Literature
Not Applicable.
Examples of Funded Projects
Not Applicable.


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