FHA loans can help you not only make your home 'Green', but save you money. Saving money is a great thing in any economy, right? Don't you like to know about the little secrets of cutting corners? How would you like to save over $200 a month just because you improved your home with energy-efficient ideas.
Are you part of the GREEN family now, because not only did you save money, improve your home, but because you are helping the environment? And did you know that this can be done without spending extra money out of pocket as possible.
How about that this is a great way for a realtor or a seller to market their home also. Especially for those homes that are 5 years or older. You can also refinance your current mortgage by using this program.
HUD
states that Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEMs. (Energy Efficient Mortgages) FHA has adopted this into their financing options which allows a borrower to :
- save money monthly
- incorporate the improvement costs into the mortgage
- these improvements are installed after the loan closes
- this program allows you to use normal FHA guidelines with FHA mortgages
EEM's recognize that reduced utility expenses will allow a homeowner to pay a higher mortgage payment to cover the cost of the energy improvements that were financed into the mortgage. A main reason behind the EEMs program offers homeowner's who couldn't initially afford the cost of these energy saving improvements out of pocket, giving them the chance to finance them. Thus cutting down on pollution and making the environment a better place to live.
Eligibility Requirements
- Properties that are eligible are One to Four unit existing and new construction properties.
- Borrowers are approved through the normal FHA guidelines for obtaining a mortgage.
- The cost of the energy-efficient improvements that may be eligible for financing into the mortgage is greater of 5 percent of the property's value (not to exceed $8,000) or $4,000 - whichever is greater.
- To be eligible for this mortgage, the energy efficient-improvements must be cost effective, meaning that the total cost of improvements is less than the total present value of the energy saved.
- The cost of the energy improvements and the energy savings must be determined by a home energy rating report which is done by a home energy rating system (HERS) or energy consultant. The HERS report usually costs from $150 to $350 and can be paid by the seller, the buyer, or sometimes included into the mortgage.
- The energy improvements are installed after the loan closes. The money is placed into an escrow account and is released once an inspection verifies the improvements are completed and that the savings will be achieved.
- Because of this program, the final loan amount can exceed the maximum mortgage limit by the amount of the energy-efficient improvements. Here is a list of the FHA max mortgage limits.
|
XXXXXXXXXXXXXXXXXXXXXXXXXX |
New Home/Purchase Price |
Same home w/energy cost of improvements |
|
Purchase Price |
$200,000 |
$205,340 |
|
Loan Amt w/ MIP * |
$197,455 * |
$202,726 * |
|
Monthly payment @ 7.00% ** |
$1,313 ** |
$1,348 ** |
|
Monthly payment for electric |
$198 |
$104 |
|
Total Monthly payment ( Mtg payment + electric bill ) |
$1,511 |
$1,452 |
|
Monthly Savings |
|
$59 per month *** |
Asterisk *-- MIP now varies depending on credit scores. FHA Mortgage Insurance One-Time MIP
** -- Monthly payment does not include taxes or homeowners insurance. Just Principal & Interest (P & I)
*** -- As you can see, it's not a huge savings, but it does add up. Just in 1 year only you saved $708. And the cost of the energy improvements that were added onto your mortgage now become a tax write-off.
Along with the FHA loans for these EEMS, the VA(Veterans Administration) and FNMA / FHLMC also back these types of programs with their own guidelines.
Department of Energy (DOE) and HUD established a joint response to energy efficient housing.
Author of this blog is : Jeff Belonger The FHA Expert
____________________________________________________________________________________
For more information on FHA loans, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
great informaion, Jeff, I am one of only a two or three mortgage companies that can do EEMs in Northwest Indiana
Dave
DAVE..... I am confused. Is it because you need to be certified in Indiana to do them? I was under the impression that anyone can do them, as long as they are FHA approved. And thanks for the compliment.
I know so little about the engery efficeint stuff, but I guess you're bookmarked again.
Who knew? Great post Jeff. Thanks for linking the green to FHA.
Good solid information Jeff, always informative.
Now that's good stuff, Jeff - as we see more of a focus on energy efficiency, the savvy buyer can use this to great benefit!
I'm not real sure that I'm Pro-reblogging, but since you gave permission on this one, I did so--this is good info that everyone should see.
LARRY..... I didn't know much about this either until I wrote my first post about 13 months ago. With today's economy and higher electric bills, this is great information to market. It could open so many doors in my opinion.
MARGARET..... my pleasure on all accounts. thanks
FRED.... thank you very much for those polite compliments.
KENT...... it's great, because this is for any buyer. I really think that this is a great thing to push. Not only can it help the consumer, but could be more business for realtors and loan officers. And thanks for re-blogging this one.
Jeff, In the long run it DOES pay off. What I don't understand is why they are doing so much buiding here but are not building GREEN...people would reap the benefits for years to come.
EEM is a great loan program! Not only making it possible to improve your home, but doing it in a way that is good for the envirnment as well as your pocket book. :)
Hi Jeff,
I bookmarked your post so I can refer back to it. You have written some very interesting "stuff" and it warrants looking deeper into this topic. Thank you for your post.
Jeff- This is great information, although I'm a bit confused by the 4th bullet point under "Eligibility Requirements." "the total cost of improvements is less than the total present value of energy saved." If I install new energy efficient windows for example, it will take many months of savings to recoup the initial expense. What am I missing? Thanks!
Hi Jeff -- what types of things would qualify under this type of loan (new heating system??? -- what about appliances??) Also, just wondering who does the energy certification?
CAROLE.... yes, it would pay off, even in a few short years.... about 2 to 3 years. In regards to why they aren't? Not sure if you remember my Manhattan series that I wrote about back in May of 2007. But I mentioned a building on the East side of Manhattan, that was the first high rise building to go 100% green. Yes, you wonder why the gov't doesn't make it mandatory to some respect. At least the basics... yes, it costs a little more and you can slightly pass it onto the consumer. But we need to make these changes... in regards to this program, I am going to start advertising it...
CASEY..... yes, it is a great loan and can do so much for our environment and for the economy. thanks
JON.... my pleasure and thank you very much for those kind words. Now, please send $10 to Jeff Belonger PO BOX ______.... lol
MATT..... good question. Just as I mentioned in the chart. We need to know that there will be a savings right from the get go. That you will be saving money from your current energy bill, that your bill wouldn't be higher than it currently is. Making this the right thing to do. I hope that helps some.
JOAN.... the earier question first. That person doing the certification needs to be an approved energy specialist that has been certified. I can get you more info on this.
With our ailing economy coupled with an increased focus on our environment and going green, this could not have been a more appropriate article.
Great stuff. As always, your blogs are a wealth of information.
Paul Thompson
Wells Fargo Home Mortgage
Vancouver, WA
Jeff, great post. I personally have not done one of these out of fear of trying something new. After reading your blog, I may actually check into doing these. Thanks for posting.
Hi Jeff ,
Great Post , if you are so kind ,,, read my Blogs ,,, and you will see, that some thing's you wrote are out there for quite some years, @ 1970
. Please correct me , is it true that Fannie and Freddy are not buy EEM's .
I got a email in my last blog from Resnet , check it out
Hi Jeff, when was the last time you made a EEM Mortgage ? Call me.
I have received a number of calls on these recently. No takers yet, but at least its something positive relating to mortgages...
Jeff,
Another great, informative article. I've been doing a lot of VA Energy Efficient Mortgages recently and it is amazing how much money the client can save out of pocket on a monthly basis.
Awe this could help so many and our earth!
Great info. I need to get a little better informed on this program.
Stuff that pig! Very timely post with this major arctic blast freezing most of this side of the nation. Just think how much you could be saving if -15 degrees of freezing cold wasn't getting into your home!
Hi Jeff~ great information! I'm glad after 17 years these are finally starting to take off! and I'm glad to see you pushing them! I worked hard at trying to get them accepted for 2 years, now I've moved to the supply side of the fence!
Can you check the guidelines and do a post~ there is a separate section for solar and wind systems in the guidelines. I'd like to get your input on it. Check it out under 1-7 c - additions to the mortgage amount.
Hey Jeff..you still there????