ENERGY MORTGAGES
New Energy Mortgage products offered by Fannie Mae (Conventional Loans) FHA are better than ever and simple to use for everyone involved: the seller, the buyer, and the mortgage lender. Energy mortgages are available for both new and existing homes.
For more information on Energy Mortgages, visit the National Residential Energy Services Network at http://natresnet.org.
EXISTING HOMES
Using an Energy Improvement Mortgage (EIM) to purchase or refinance an existing home allows the purchaser to make cost-effective energy improvements to the home and finance the improvements as part of the first mortgage. In most cases, there is no additional down payment required and if you qualify for the original loan, you automatically qualify for an Energy Improvement Mortgage.
Under the rules governing EIMs, the utility bill savings achieved in making the home more energy efficient is always greater than the added cost of the mortgage. On average, homeowners in Louisiana using an EIM to upgrade their home can expect to achieve a net annual savings of $300 to $500.
In essence, when you use an EIM to buy and improve an existing home, you are using a portion of the utility savings to finance improvements to your home and putting the rest in your pocket.
NEW HOMES
For new homes, Energy Efficient Mortgages (EEM) offer advantages for both the buyer and home builder.
Since an energy efficient home will consistently have lower average energy bills, potential buyers using an EEM can actually purchase a home with less income than would otherwise be required for a standard conventional loan.
EEMs also offer increased appraisals reflecting the value of the energy efficient elements added to the home. Increased appraisals can also be helpful in avoiding private mortgage insurance (PMI) by making it easier to achieve a Loan-to-Value (LTV) at or below 80 percent.
GUIDELINES
The following is a summary of the FHA guidelines for energy mortgages. For complete details and the latest changes, visit the National Residential Energy Services Network at http://natresnet.org
Eligibility:
1-2 unit owner occupies (up to four units if tied into 203(k)
Improvement Financing:
$4,000 or 5% of the appraised value (whichever is greater) up to a maximum of $8,000
Down Payments:
No additional down payment on the energy improvements if the improvements have a present value greater than the cost of the energy upgrades.
Loan Limits:
FHA maximum loan limits can be exceeded by the energy improvements being financed
Loan to Value:
Final LTV may exceed 100% of appraised value when the energy improvements have a present value greater than the cost of upgrades
Eligible Improvements:
All improvements identified by home energy rating as having a combined present value greater than the cost of upgrades
Installation Time Limits:
90 days
Necessary Documentation:
Home energy rating, contractor bids, B Worksheet
203(k):
Energy mortgage can be combined with a 203(k)
New Homes:
The FHA Energy Mortgage applies to new homes. The home energy rating would be calculated to meet minimum energy code to base calculated savings. In addition a 2% debt-to-ratio stretch offered in loan qualification.
