Energy Efficient Mortgage Home Loan
An Energy Efficient Mortgage (EEM) takes into consideration the cost-effective energy saving measures implemented in a new or remodeled home to increase the amount of the loan. It's based on the principle that energy-efficient homes cost less to operate, which means buyers choosing energy-efficient homes can afford to spend more.
The result is a more desirable, higher valued home with significantly lower monthly operating costs. EEMs are offered by federally insured programs including FHA and VA in addition to conventional programs by Fannie Mae and Freddie Mac.
Benefits
EEMs can be used for the purchase of a new or remodeled energy efficient home in addition to a refinance. An Energy Improvement Mortgage, a type of EEM, can be used to purchase a standard home that will have energy efficiency improvements made to them. EEMs benefit everyone...
Buyers
- Increased potential resale value and economic lifecycle;
- Purchase a higher quality home with lower operating costs;
- Qualify for a larger loan with less stringent debt-to-income requirements.
Sellers
- Sets your home apart in a competitive market;
- More attractive to potential buyers resulting in a quicker sale;
- Appeals to larger group of potential buyers because it's more affordable.
Community and Environment
- Healthier environment for everyone;
- The home's carbon footprint is reduced;
- Better and more efficient use of resources.
How it Works...
The qualifying factor is based on a home energy rating or grade determined by a Home Energy Rating Systems (HERS) report. The score on the HERs report varies between 1 and 100 with a lower score being better.
The HERs report sets a standard for the measurement of a home's energy efficiency. Inspections must be conducted by a RESNET certified energy efficiency professional.
- An estimate is made of the home's energy costs savings;
- The savings are added to the borrower's income;
- The increased income results in the borrower qualifying for a larger loan amount;
- Depending on the lender and loan type, the cost of improvements, up to 15% of the standard home value, may be factored into the EEM;
- The value of the home is adjusted by the present value of the energy savings determined by the HERs report.
If the buyer is purchasing a home that does not yet have energy efficient features, the HERs report recommends cost-effective measures to implement along with the estimated savings that would result. The costs of improvement can then be included in the EEM.
To qualify for a EEM, average monthly energy savings must exceed the increase on the monthly mortgage reflecting the costs of installing the energy-efficient improvements.
Visit our Resource Links Page for links to more information on Energy-Efficient Mortgages.
