Energy Efficient Loans

What is an energy efficient mortgage (EEM)?

Homeowners purchasing homes built with structural insulated panels (SIPs) may qualify for an Energy Efficient Mortgage (EEM). These special mortgages allow debt to income ratios to be stretched when purchasing an energy efficient home.Next to the mortgage payment, utility bills are one of the largest costs of owning a home, and as energy prices continue to rise utility costs will become more burdensome to homeowners. A high performance SIP home can save so much money in heating and cooling bills that lenders are willing to give energy efficient homeowners a larger loan.

How do energy efficient mortgages work?

Even with a high monthly mortgage payment, an energy efficient SIP home will save you money every month. Lenders are willing to “stretch” debt to income qualifying ratios up to 2% for homeowners purchasing energy efficient homes, meaning homeowners can borrow more ont he same amount of income.

How do I qualify and apply for an energy efficient mortgage?

To qualify for an Energy Efficient Mortgage, the home being purchased must be tested for projected energy usage. The measurement of the amount of energy a home uses is called the Home Energy Rating system Index, or HERS index. A HERS index is also used to determine whether a home meets ENERGY STAR standards or qualifies for tax credits under the Energy Policy act of 2005, however, homes do not have to qualify for these programs to be eligible for Energy Efficient Mortgages.

How much does a HERS rating cost?

Costs are between $400 and $600. The cost of the rating could be paid for by the builder, lender, or real estate agent. Sometimes the cost of a HERS rating can be financed as part of the mortgage. The fee for a HERS rating is small compared to the amount of money an energy efficient home will save in utility costs.

Where can I find more about energy efficient mortgages?

Energy Efficient Mortgages are federally recognized and available through most lenders, including Fannie Mae and Freddie Mac. The Federal Housing Administration offers EEM’s, as well as the Department of Veteran’s Affairs, and recently the USDA’s Rural Development program. To find out more on Energy Efficient Mortgages visit the FHA’s website.