FHA Energy Efficient Mortgage
As we all know energy costs continue to increase. Many communities are supporting energy efficiency initiatives to conserve energy. A nice feature built into the FHA loan program is the ability to add qualified energy efficient improvements right into the mortgage. This provides every FHA borrower the ability to improve their home, conserve energy costs, and save money as energy prices increase.
Energy Efficient Mortgage Guidelines
|FHA Energy Efficient Mortgage (EEM)|
|Max Base Loan Amount (before EEM):||$362,250 in Clark County, NV – limit varies by county|
|Maximum Improvement Costs:||see below|
|Appraisal:||Not required. A home energy audit report is required.|
|Interest Rate:||Current market|
|Improvements:||Must reduce energy consumption|
Qualified Energy Efficient Improvements
Along with the standard loan documentation required to do a streamline refinance an energy audit report and the list of repairs & costs will be reviewed by the underwriter. The approve your EEM loan the energy audit report must show the repairs/ improvements will net a savings on your energy bill greater than the monthly cost of financing those repairs. As an example, if you roll $10,000 of improvements into your mortgage at an increase in payment monthly of $35 your energy bill must go down by $35 or more. Additionally, only repairs that qualify as energy efficiency repairs are allowed. Contact us for more details on what is & is not accepted.
Maximum Financed Energy Efficiency Improvements
The maximum amount that can be added to the base loan amount for the energy efficiency improvements that can be financed into a purchase or a refinance is the lesser of:
- The total dollar amount of a cost-effective energy package as determined by the home
energy audit; or
- the lesser of 5 percent of:
o the Adjusted Value;
o 115 percent of the median area price of a Single Family dwelling; or
o 150 percent of the national conforming mortgage limit.
Benefits of an Energy Efficiency Mortgage
- Light on documentation
- No Appraisal
- Hedge against energy cost increases
- Fund those repairs without hurting your savings
- Conserve energy
- Low pocket closing costs
Energy Efficient Mortgage FAQ’s
Do I have to use a contractor? No, but you may want to rely on the energy audit professionals to help coordinate to ensure the energy savings promised in their report.
When does the improvement money get paid out? Once the repairs are made the request is made by the escrow company for funding to be delivered & disbursed. Often, a final inspection will occur to ensure the repairs are made as promised. This can take several weeks.
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*Limited time OAC