Home Loans 101: What is "Graduated Payment?"
What is a "graduated payment" in a mortgage?
A graduated-payment mortgage (GPM) is a type of fixed-rate mortgage designed to make homeownership more accessible to borrowers who anticipate their income will increase over time.
This mortgage begins with lower monthly payments that gradually increase each year, typically by a rate of 7% to 12%, until they reach a predetermined higher level. The initial payments are set at a lower base level, making the loan more affordable in the early years. Over the term of the loan, these payments continue to rise annually according to the schedule outlined in the loan agreement, eventually stabilizing once the full payment amount is reached.
This structure is particularly beneficial for individuals who expect their earnings to grow steadily, allowing them to manage smaller payments initially while planning for larger payments as their financial situation improves.
✅ Benefits of Contract Loan Processing for VA Loans
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Specialized VA Knowledge
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VA loans have unique requirements (COE, residual income, funding fee calculations, appraisal requirements).
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A contract processor experienced in VA loans can spot potential issues early and streamline the process.
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Cost Savings for Lenders
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No need to hire full-time staff; processors are paid per file.
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Helps smaller brokerages or lenders manage fluctuating loan volumes without carrying extra payroll.
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Faster Turn Times
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Contract processors often work remotely and are paid per closed file, so they’re incentivized to move loans quickly.
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They can push COE requests, follow up on VA appraisals, and ensure VA-specific forms (26-1880, 26-8923) are completed on time.
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Compliance & Accuracy
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VA has strict guidelines (e.g., allowable fees, seller concessions, and veteran protections).
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A skilled processor reduces risk of compliance errors that could lead to loan buybacks or funding delays.
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Scalability
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During high volume seasons (e.g., rate drops, PCS military moves), lenders can bring on extra processors quickly without long-term HR commitments.
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Reduced Loan Officer Burden
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Lets LOs focus on originating, networking, and serving clients while the processor handles gathering DD-214s, income docs, pest inspection reports (if required), and underwriting conditions.
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Improved Borrower Experience
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Veterans and active-duty borrowers often value clear communication and speed.
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A processor who knows the VA process can anticipate documentation needs and prevent last-minute surprises.
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👉 In short: Contract processors help lenders stay lean, compliant, and efficient, while ensuring veterans have a smoother experience.
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