The federal government has been working to help increase homeownership rates for decades. The Energy Efficient Mortgage (EEM) program is one of many FHA programs that help Americans realize their housing dreams. Many homes, especially older ones , could be much more affordable if they were upgraded to be more energy efficient. EEM allows borrowers to make these upgrades and save money as a new homeowner.
The U.S. Department of Housing and Urban Development (HUD) first created the Energy Efficient Mortgage Program in 1992 and piloted it in five states. In 1995, the program was expanded to all states. The idea behind the program is that “cost-effective energy improvements can reduce utility bills and provide more income for mortgage payments . ” Basically, if borrowers don’t have to pay as much in utility bills, they can buy and build a home . The EEM program funds energy improvements that reduce these costs .
How it works
Potential borrowers find an FHA-approved lender and apply for an energy-efficient mortgage . The lender will actually process the loan and fund it, but the FHA will insure the lender. Once a borrower finds a property , the lender will first require an energy assessment of the home. This is done by a qualified energy consultant and determines the types of energy-efficient improvements that can be made and how much the borrower can save . The assessment may reveal improvements such as adding solar or wind technology, thermostats, or insulation.
The borrower then selects the desired upgrades, creating what is called an “energy package.” Lenders estimate the total cost of an energy package, including labor, materials, inspections, and home energy assessment fees. Energy packages must be determined to be cost-effective, meaning the total amount of the energy package that can be added to the mortgage cannot exceed the estimated savings.
A mortgage can finance up to 100% of the energy package, as long as the amount is less than 5% of one of the following: 115% of the median price per square foot of a single-family home, 150% of the median price per square foot of a single-family home % median price per square foot of a single-family home National mortgage rates are based on thresholds or adjusted property value. Borrowers can add closing costs and mortgage insurance premiums to the total loan amount.
How to qualify
Borrowers must be able to meet FHA Section 203(b) income requirements and must purchase a new or existing home with the intent to personally occupy it. Individual lenders may also require other qualifications.
Interested borrowers can contact their lender and ask about the energy-efficient mortgage program. For those who qualify, it can be a great way to make the dream of homeownership a reality.
Yes, the Energy Efficient Mortgage (EEM) program is one of the programs offered by the Federal Housing Administration (FHA) to help Americans purchase energy-efficient homes or improve the energy efficiency of existing properties.
The primary goal of the EEM program is to provide homeowners with the opportunity to finance energy efficiency improvements at home through a mortgage loan, allowing them to obtain a larger mortgage loan and/or save on energy costs in the long run.
Below are some key points about the Energy Efficiency Mortgage (EEM) program:
Financing Energy Improvements: The EEM program allows homebuyers to finance qualified energy improvements as part of their mortgage. These improvements can include improvements such as installing more efficient heating, ventilation, and air conditioning systems, improved insulation, energy-efficient windows, solar panels, and other items that increase the energy efficiency of the home.
Long-term savings: By financing energy efficiency improvements, homeowners can reduce utility bills and save money in the long run. This can make the property more affordable and increase its value in the long run.
Eligibility Requirements: To qualify for a mortgage under the EEM program, the property must meet certain energy efficiency standards and the proposed improvements must demonstrate that they will generate sufficient energy savings to cover the cost of the improvements. Lenders may have other specific requirements.
Types of loans: The EEM program is available for FHA and VA loans, meaning it is backed by the Federal Housing Administration or the Department of Veterans Affairs. This makes it easier for homebuyers to get loans.
In summary, the Energy Efficiency Mortgage (EEM) program is an attractive option for homebuyers who want to improve the energy efficiency of their property and reduce long-term costs while meeting federal government homeownership goals.
