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What is an Energy Efficient Mortgage?

Jonathan Blackwell

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An Energy Efficient Mortgage (EEM) is a mortgage that credits a home's energy efficiency in the mortgage itself. EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

To get an EEM a borrower typically has to have a home energy rater conduct a home energy rating (HERS) before financing is approved. This rating verifies for the lender that the home is energy-efficient.

In the past most EEM's were used to purchase a new home that already had energy efficient improvements in place. However, we specialize in the opposite of that, we help show you how to renovate your current home and add energy efficient improvements or to purchase an existing home with a FHA 203K renovation loans and add the improvements during the renovation process. So how does it benefit you?

Besides the fact you are allowed higher debt-to-income ratios, FHA EEMs allow lenders to add 100 percent of the additional cost of cost-effective energy efficiency improvements to an already approved mortgage loan (as long as the additional costs do not exceed $4000 or 5 percent of the value of the home, up to a maximum of $8000, whichever is greater). You will also end up with a far more marketable home if and when you choose to sell. We encourage you to take advantage of these money saving improvements while, at the same time, using environmentally friendly building materials and techniques to a truly create a home that has a minimal impact on the environment. Feeling good about your contribution to saving the planet along with saving yourself some serious coin on your monthly energy bills is a solid combination.

Jonathan Blackwell
Green Renovation Specialist
Hometown Lenders


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