The EEM allows homeowners to get a federally insured loan to purchase energy efficient products in order to save money on utility bills. The FHA recognizes that saving money on energy allows homeowners to make a higher payment on their monthly mortgage. The savings realized on energy efficiency can then be incorporated into the monthly payment, often above what the homeowners would normally qualify for.
FHA Energy Efficient Mortgage Program Options
If energy savings measures are incorporated into a home, the borrower can actually borrow more than their debt to income ratio allows under a normal FHA loan. This energy saving factor can be used on a home purchase and incorporated into the loan. The EEM can also be used as an upgrade to an existing home with a FHA refinance.
Benefits of an FHA Energy Efficient Mortgage
- The change in income-to-debt ratios may enable the buyer to qualify for a larger, more expensive home.
- An energy efficient home can save money on utility bills.
- Energy efficient features can increase the resale value of the home.
- When selling the home, the potential buyer could more easily qualify thorough an EEM loan.
- Selling an energy efficient home will attract more buyers.
Home Energy Rating System (HERS)
Before applying for an EEM loan, a home energy rating system report needs to be conducted. The HERS report is a measurement of the home’s energy efficiency. It is given a rating of 1 to 100, with 1 being the most energy efficient. The report also gives the homeowners a list of options for upgrading to a higher energy efficiency score. Some of the factors that are considered for a HERS report may include:
- Regional climate
- Heating and air conditioning efficiency
- Water heating system
- Insulation
- Solar energy
- Window efficiency
- Wall and window locations
- Air leakage
- Duct leakage
- Utility rates
The HERS report should be completed early. Once the HERS report is completed, the borrower will be able to determine the cost associated with upgrades. An existing home with a good rating may enable the borrower to qualify for a large loan amount through the EEM program.
Not every lender offers FHA insured home loans. Since the FHA is an insurer of loans, home loan interest rates can still vary between lenders. Shopping different lenders is advisable to get the best mortgage rate. There are various FHA programs that the EEM can compliment, so discus the different options with the lender. For more information contact the FHA Resource Center by phone or email.
Resource:
Hud.gov
James Clausen - Clausen received a Bachelors Degree in Business Administration in Automotive Management and Marketing at Northwood University, graduating ...
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