FHA Loan and Mortgage Glossary - Terms Beginning with 'G'

  • Graduated Payment Mortgage: This is a type of mortgage where the payments start out low, then gradually increase over time to a specific point where they level off and stay the same again. At the beginning of this loan the payments are so low that negative amortization occurs and that amount of interest is added on to the total principal of the loan to be paid later when the payment amounts increase. These types of loans are becoming less common because of new mortgage regulations.
  • Guarantee: This is a promise to fulfill an obligation for another party in the case that that party does not fulfill the obligation on their own. For instance, the FHA and VA offer home loan mortgage guarantees that offer a type of warranty to the lender that if the borrower does not fulfill their obligation to pay that they will give a specified amount of that loan back to the lender.