Helpful Tips on Energy Efficient Mortgages
Having an energy efficient mortgage makes perfect sense when it comes to getting great savings in having energy-saving features installed in your home. When you qualify for an energy efficient mortgage, it simply means getting larger loans for a comfortable and more energy-efficient dream home of your choice. When the Congress have passed a bill in 1992 on EEMs or energy efficient mortgages, it had then fully expanded into a national program in 1995 – where many homeowners simply appreciate the idea of saving more money on utility bills and having more funds to use for energy improvements in their homes. These borrowers don’t even have to make any down payment or have extra money to qualify for a loan. Just having an energy rater conduct an assessment can have the financing scheme approved. If the new home you choose to buy is energy efficient, like an Energy Star qualified home, you can get an energy efficient mortgage then.
What are the Types of Energy Efficient Mortgage Can You Take?
Conventional EEM
This type is offered by those who provide a Fannie Mae or Freddie Mac type of loan, where the lender will increase the loan amount that shall equal the estimated value of savings from cost-efficient energy use.
FHA EEM
This type is where lenders add 100% of the cost of an energy efficient improvement to your approved loan amount. The cost should not exceed $4,000 or five percent of your home’s value. It can reach an amount up to a maximum of $8,000. No down payment is required and loan can be granted on site-built or newly constructed homes.
VA EEM
This type is available for military personnel and veterans when purchasing an existing home that needs energy improvements. The Veteran’s Administration shall offer energy improvement loans between $3,000 and $6,000.
Energy Star Mortgage
This type will soon be very useful in lowering mortgage cost and having an energy-efficient home as well. Borrowers will not need to pay more than the usual loan rate, where they can borrow beyond the value of their home’s energy savings.
Six Key Points to Remember When Applying for an Energy Efficient Mortgage?
1. If you want to apply for an FHA-insured EEM, you need to contact an FHA-approved lender to start with and meet the salary requirements on FHA’s Standard Section 203 b policy to see if you can make monthly payments.
2. To be eligible for an FHA-insured loan, you must be able to make a 3.5% down payment.
3. Properties eligible are typically one to four units of new and existing construction. Cooperative units cannot qualify for an EEM. You may add an energy efficient mortgage to other types of loans.
4. Have an energy consultant assess the cost of improvement in your home and have a HERS ( Home Energy Rating System ). A HERS report shall include the overall energy rating index of the home and recommended cost for upgrades. It will also include cost estimates on life span of the upgrades, yearly savings cost, and total energy cost of a home before and after upgrades are installed. You may include expenses arising from the energy inspection to your mortgage.
5. Make sure that the home’s total cost of energy improvement is lower than the value of the energy saved at present.
6. Maximum limits on your EEM shall depend on the home’s location. Normally, your cost of verified energy efficient mortgage is added on top of your loan amount, which can total to something that exceeds your maximum allowable loan limit.
Everybody wins in the end when it comes to an energy efficient mortgage, where the home buyers will have more buying power on a home that provides comfort, savings, and a promise of higher resale value in the future. Sellers will also gain more when they can dispose the property easily because of its key energy-efficient features, specially great in an ever-competitive housing market. Remodelers and lenders can get potential resale value of a home after having it refinanced for energy efficiency improvements. Remember that each house shall be as unique as its owner and no two EEM can ever be alike. When your home is your biggest investment, you need to invest wisely and choose only those with energy efficient qualities like having double-paned windows, insulation, and many more. Sustainable design is the key!
RESOURCES:
Energy Star. ‘ What is an Energy Efficient Mortgage? “
http://www.energystar.gov/index.cfm?c=bldrs_lenders_raters.energy_efficient_mortgage
US Department of Housing. “ Energy Efficient Mortgage Program. “ August 2009.
http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm
US Department of Housing. “ Energy Efficient Mortgage Home Owner Guide. “ August 2009.
http://www.nls.gov/offices/hsg/sfh/eem/eemhog96.cfm
