Paulo asks: Where can I find information on energy efficient mortgages? Who makes these loans? Am I qualified to get one? Thanks...

Answer: Hi Paulo,
The term "Energy Efficient Mortgage" (or EEM) refers to all types of mortgages which are used to finance the purchase of existing or new homes that include specific energy efficiency improvements that have been (or will be) made to them.

Energy Improvement Mortgages allow borrowers to include the cost of energy-efficiency improvements to an existing home in the mortgage without increasing the down payment. EIMs allow the borrower to use the money saved in utility bills to finance energy improvements.

An Energy Efficient Mortgage also credits a home’s energy efficiency in the mortgage's balance. By doing so, an EEM provides borrowers the opportunity to finance the costs associated with energy-saving measures as part of a single loan. This practice stretches debt-to-income qualifying ratios on loans which allows borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

In order to qualify for an EEM, a borrower typically has to have a home energy rating system (HERS) provider conduct a home energy rating before financing is approved. This rating verifies for the lender that the home is energy-efficient. Typically, the lender will require a home energy rater to submit a written estimate of the monthly energy savings and the value of the energy efficiency measures — known as the Energy Savings Value.

It is more common for EEMs to be used to purchase a new home that is already energy efficient. A new home that qualifies as an "ENERGY STAR Home" would be considered a candidate for an Energy Efficient Mortgage.

Energy Efficient Mortgages are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac). Lenders who participate in Energy Efficient Mortgage programs may offer conventional EEMs, FHA EEMs, or VA EEMs.

Qualification: In terms of whether or not you are qualified for an energy efficient mortgage, I could not say. However, according to the HUD website, all persons who meet the income requirements for FHA's standard Section 203(b) insurance and can make the monthly mortgage payments are eligible to apply.

The cost of the energy improvements in the home and estimate of the energy savings must be determined by a HERS provider or an energy consultant. The cost of an energy inspection report and related fees may be included in the mortgage. Condominiums may qualify, however coops (cooperative units) are not eligible.

EEM can also be used with FHA's Section 203(h) program for mortgages made to victims of presidentially declared disasters. The mortgage must comply with both Section 203(h) requirements, as well as those for EEM. However, the program is limited to one unit detached houses.

Good luck!
Green-Buildings.com

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