Did you know that an Energy Efficient Mortgage can be used to purchase a home and add the cost of certain repairs to the loan? With tons of distressed properties on the market, this can be a good way for home buyers to purchase a nice home without paying $1000’s out of pocket for repairs.
What is an Energy Efficient Mortgage (EEM)?
The main idea behind these types of mortgage is that energy efficient homes use less energy and are, therefore, less expensive to own. People who have more efficient homes spend less per month on utility costs. Theoretically, home buyers should have more to spend on their monthly mortgage payments allowing them to afford a larger mortgage.
The cost of the repairs is added to the loan amount for an FHA or VA loan. This process is easy and does not add additional time to the processing of the loan.
What are the different kinds of EEMs?
There are 2 main kinds of EEMs:
· FHA EEM: This EEM is done in conjunction with FHA financing. Borrowers can finance up to 5% of the home’s value and it is added on top of an FHA purchase with the standard 3.5% down payment.
· VA EEM: This version of the EEM Mortgage is used in conjunction with VA financing. It allows borrowers to finance up to $6,000 for energy efficient upgrades when purchasing an existing home regardless of the value of the home.
Depending on the amount of the repairs and the type of financing, a Home Energy Rating System (HERS) report may be necessary to determine the savings meet the requirements for the loans. This report ranges from $500-$800 and should be ordered early in the process. The HERS report is required on all FHA loans.
We would then just need a bid outlining the repairs and costs. That is it!
So, what kinds of things does an EEM pay for?
An EEM can pay for improvements like new dual pane windows, insulation, weatherizing, energy efficient heating and cooling systems, installing active and passive solar technologies, and other upgrades.
Want to find out more about an EEM loan ?
Call or email Jim Baldasare today
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