Energy Efficient Mortgage Program

FHA’s Energy Efficient Mortgage program (EEM) helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy efficiency features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage.

What is the Purpose?

In 1992, Congress mandated a pilot demonstration of Energy Efficient Mortgages (EEMs) in five states. In 1995, the pilot was expanded as a national program.

Energy Efficient Mortgage recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage. FHA Energy Efficient Mortgage provide mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage. The borrower does not have to qualify for the additional money and does not make a down payment on it. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, or savings and loan association, and the mortgage is insured by HUD. FHA insures loans. FHA does not provide loans.

Type of Mortgage:

Energy Efficient Mortgage is one of many FHA programs that insure mortgage loans–and thus encourage lenders to make mortgage credit available to borrowers who would not otherwise qualify for conventional loans on affordable terms (such as first time homebuyers) and to residents of disadvantaged neighborhoods (where mortgages may be hard to get). Borrowers who obtain FHA’s popular Section 203(b) Mortgage Insurance for one to four family homes are eligible for approximately 96.5 percent financing, and are able to add the upfront mortgage insurance premium to the mortgage. The borrower must also pay an annual premium.

Energy Efficient Mortgage can also be used with the FHA Section 203(k) rehabilitation program and generally follows that program’s financing guidelines. For energy efficient housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD’s Title I Home Improvement Loan program.

How to Get a Energy Efficient Mortgage:

Eligibility Requirements

The borrower is eligible for a maximum FHA insured loan, using standard underwriting procedures. The borrower must make a 3.5 percent down payment. This 3.5 percent down payment is based on the sales price or appraised value. Any upfront mortgage insurance premium can be financed as part of the mortgage.

1. Eligible properties are one to four unit existing and new construction. Energy Efficient Mortgage may be added to some other loan types, including streamline refinances.

2. The cost of the energy efficient improvements that may be eligible for financing into the mortgage is the lesser of A or B as follows:

A. The dollar amount of cost-effective energy improvements, plus cost of report and inspections, OR

B. The lesser of 5% of  The value of the property, or 115% of the median area price of a single family dwelling, or 150% of the conforming Freddie Mac limit.

To be eligible for inclusion in the mortgage, the energy efficient improvements must be cost effective, meaning that the total cost of the improvements is less than the total present value of the energy saved over the useful life of the energy improvement.

The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating report that is prepared by an energy consultant using a Home Energy Rating System (HERS). The cost of the energy rating report and inspections may be financed as part of the cost effective energy package.

The energy improvements are installed after the loan closes. The lender will place the money in an escrow account. The money will be released to the borrower after an inspection verifies that the improvements are installed and the energy savings will be achieved.

Our Certified Mortgage Planner Specialists will guide you through each stage of the process and provide you with expert advice along the way. Whether you are Buying a home or Refinancing your current mortgage we are committed to making the home loan process clear, informative, and simple. At Guardian Mortgage, we understand that buying a home is equally big decision as refinancing your current mortgage. That’s why we are committed to providing you with the information you need to make well informed decisions.

When you are ready, simply Apply Online, Request Personalized Rate Quote or call us at 703-349-1084 to speak with live person.