VA Growing Equity Mortgages (GEM)

Note: The VA Growing Equity Mortgage (GEM) program has been discontinued. This article is for educational purposes only and does not reflect currently available VA loan options.

However, understanding what GEMs were—and what similar tools exist today—can help you make informed decisions about building equity and managing payments with your VA home loan.

What Was a VA Growing Equity Mortgage?

VA Growing Equity Mortgages (GEMs) were a specialty loan structure designed to help borrowers ease into mortgage payments, build equity faster, and pay off their loan sooner. Not all VA-approved lenders offered them — they were an optional product for those who qualified.

GEMs were especially attractive to borrowers expecting their income to grow over time. Rather than locking into a fixed payment for 30 years, GEM borrowers started with lower payments that increased gradually each year. Crucially, those payment increases weren’t going toward interest — they were applied directly to the principal, reducing the loan balance faster and saving thousands over the life of the loan.

How They Worked

VA GEMs were based on a 30-year repayment plan with one key twist: scheduled annual payment increases, typically calculated at a fixed percentage (such as 3%), applied directly to principal. Increases usually occurred during the first 5–10 years, after which payments leveled off for the remainder of the term.

As the VA once described it, loan payoff could occur within just a few years after payments leveled off.

To qualify, borrowers had to demonstrate they could afford not just the initial lower payments, but also the higher payments down the line. That meant documenting income stability and likely future earnings — through W-2s, tax returns, pay stubs, and in some cases projected income. Borrowers who were self-employed or commission-based for less than 12–24 months often had difficulty getting that income approved.

Why GEMs Are No Longer Available

In 2019, the VA issued a major revision to the VA Lender’s Handbook (VA Pamphlet 26-7), removing all references to Growing Equity Mortgages and Graduated Payment Mortgages (GPMs). Chapter 7, which previously covered these specialty loan types, no longer includes them. VA lenders are no longer authorized to offer VA-backed GEMs.

If you’ve seen GEMs mentioned elsewhere as a current option, that information is outdated. Always refer to the most recent version of the VA Lender’s Handbook or consult a VA-approved lender for what’s actually available today.

Alternatives to VA Growing Equity Mortgages

Even though GEMs are off the table, the VA loan program still provides tools to help you lower your initial monthly payment, ease into a mortgage, and build equity strategically. Here are a few:

Temporary Interest Rate Buydowns: Lower your rate and payment during the early years of your loan. A 2-1 buydown, for example, reduces your rate by 2% in year one and 1% in year two before adjusting to the full rate in year three. The cost is often covered by the seller or builder, not the borrower, and funds are held in escrow to cover the payment difference. Buydowns are available on any fixed-rate VA loan.

VA Adjustable-Rate Mortgages (ARMs): Start with a lower introductory rate that adjusts annually after an initial period. VA ARMs include caps on how much the rate can change each year and over the life of the loan. These can work well if you plan to sell or refinance within a few years, or if you need the lowest possible initial payment and have a plan for future adjustments.

30-Year Fixed VA Loan: For long-term stability, the standard 30-year fixed remains one of the best mortgage products available anywhere — no down payment required, no PMI, and consistently competitive rates.

Talk with a VA-approved lender to find the structure that fits your timeline, income, and goals.