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Energy Efficient Mortgage (EEM) & Green Financing

Commercial Energy Efficient Mortgage 

Residential Energy Efficient Mortgage

What is Energy Efficient Mortgage?

“Energy Efficient Mortgages,” also known as EEMs, make it easier for borrowers to qualify for loans to purchase homes with specific energy-efficiency improvements.

EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

To get an EEM a borrower typically has to have a home energy rater conduct a home energy rating before financing is approved. This rating verifies for the lender that the home is energy-efficient.

EEMs are normally used to purchase a new home. EEMs are sometimes confused with Energy Improvement Mortgages (EIMs), which are used for existing homes and allow borrowers to include the cost of energy-efficiency improvements in the mortgage without increasing the down payment.

EEMs (and EIMs) are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac) Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs.

Conventional Energy Efficient Mortgages

Conventional EEMs can be offered by lenders who sell their loans to Fannie Mae and Freddie Mac. Conventional EEMs increase the purchasing power of buying an energy efficient home by allowing the lender to increase the borrower’s income by a dollar amount equal to the estimated energy savings. The Fannie Mae loan also adjusts the value of the home to reflect the value of the energy efficiency measures.

FHA Energy Efficient Mortgages

FHA EEMs allow lenders to add 100 percent of the additional cost of cost-effective energy efficiency improvements to an already approved mortgage loan (as long as the additional costs do not exceed $4000 or 5 percent of the value of the home, up to a maximum of $8000, whichever is greater). No additional down payment is required, and the FHA loan limits won’t interfere with the process of obtaining the EEM. FHA EEMs are available for site-built as well as for manufactured homes. Applications for an FHA EEM must be submitted to the local HUD Field Office through an FHA-approved lending institution. HUD has a searchable list of approved lenders . Additional information is available from HUD's Office of Single Family Housing by calling (800) 569-4287. The Manufactured Housing Research Alliance Web site  has information about FHA EEMs for ENERGY STAR qualified manufactured homes.

VA Energy Efficient Mortgages

The Veteran’s Administration (VA) EEM is available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. The VA EEM caps energy improvements at $3,000–$6,000. Borrowers should ask their lender about a VA EEM at the beginning of the lending process. More information about VA EEMs can be obtained from the Web site for the U.S. Department of Veteran's Affairs or by calling (800) 827-1000.

To learn more about EEMs contact Fannie Mae, Freddie Mac, the FHA or the VA. Additional information about writing energy-efficient mortgages can be found on the Web sites for the U.S. Department of Housing and Urban Development (HUD)  and the Residential Energy Services Network (RESNET)

Source: EnergyStar

Commercial Energy Efficient Mortgage

The California Energy Commission's Energy Efficiency Financing Program provides financing for schools, hospitals and local governments through low-interest loans for feasibility studies and the installation of energy-saving measures. Notice of Availability

Who is Eligible?

  • Public Schools & Colleges

  • Cities

  • Counties

  • Special Districts

  • Public Hospitals

  • Public Care Institutions

What Types of Projects are Eligible for Loans?
(The following is a partial list.)

  • Lighting

  • Motors or variable frequency drives and pumps

  • Building insulation

  • Heating and air conditioning modifications

  • Automated energy management systems/controls

  • Energy generation including renewable energy projects and cogeneration

  • Streetlights/LED traffic signals

What Types of Facilities are Eligible for Loans?
Existing buildings, some new construction or other energy-using facilities (i.e., pumps and outdoor lights). Call (916) 654-4147 to discuss eligibility, or send e-mail to: pubprog@energy.state.ca.us

Source: California Energy Commission

Financing an Energy-Efficient New Home

A Handy Guide to Energy-Efficient Financing

This fact sheet from the U.S. Department of Energy provides more information about types of energy-efficient loans and home energy reports. Learn more

State-by-State: Lenders and Home Energy Raters

Residential Energy Services Network (RESNET) offers homebuyers a directory of lenders and raters trained by RESNET. Learn more

How Does an Energy-Efficient Mortgage (EEM) Work?

An energy-efficient mortgage (EEM) is a type of loan that allows a homebuyer to borrow more money to help pay for energy efficiency improvements or upgrades. The cost of the improvements can be spread out over the period of the mortgage or loan. In some cases, energy-efficient loans can have a lower interest rate or lower down payment requirements!

Because an energy-efficient house will have lower monthly utility bills, many lending institutions are willing to stretch the buyer's qualifying ratio.

Typical energy efficiency improvements are:

  • Upgraded heating and air-conditioning systems

  • Duct sealing and repairs

  • Ceiling, wall, floor and attic insulation

  • Energy-efficient windows

  • Energy-efficient water heaters

Who Qualifies for an EEM?
To qualify for an energy-efficient mortgage (EEM), a home should meet ENERGY STAR criteria, or demonstrate that it meets EEM requirements through an official Home Energy Rating System (HERS) report.

What is a HERS Report?
A Home Energy Rating System (HERS) report is a measurement of the relative efficiency of a house. The report takes into consideration the efficiency of the thermal envelope, windows, heating, ventilation, air conditioning as well as other components of the house.

The report is provided by a trained professional after performing an on-site inspection of the house and its systems. The report will give an estimate of the annual energy performance and costs of the house as well as suggestions for the most cost-effective energy efficiency improvements.

How do I Get a HERS Report?
A variety of home energy verification organizations are available in California to assist in verifying the energy performance of your home.

A good place to begin securing a HERS report is to contact California Home Energy Efficiency Rating System (CHEERS), a statewide nonprofit that connects consumers with certified Home Energy Rating System (HERS) raters. Call 800-424-3377 or go to www.cheers.org.

Where Can I Find Energy-Efficient Mortgage Programs?
Ask your lender or visit the Residential Energy Services Network (RESNET) website  to find lending institutions which offer energy-efficient mortgages. Most of them operate through one of the following programs:

Source: Flex Your Power

Greentopia Realty is here to assist and provide you with information on how to incorporate the concept of "greening" in your home buying and selling
process. And in many cases, there is Green Financing opportunities available for buyers and home improvement projects.

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