Energy Efficient Mortgage, or EEM, by FHA has been around for quite some time but hasn't really caught on that well. Not yet anyway. The government is just now revving up a national campaign to highlight the importance of energy conservation in housing. It's putting a lot of resources into it. As a result the EEM is definitely going to get more media exposure and could even see some additional incentives added to its current program.

Here is how the FHA EEM basically works now. The borrower would purchase or refinance a principal residence, undergoing a regular FHA home loan approval process, and then can add the cost of energy efficient improvements on top of the mortgage. He does not have to qualify for the extra money nor is it included in the down payment calculations. One- to four-unit existing and new properties are good to go.

The cost of improvements that may be eligible under EEM is the lesser of the two below:

- The actual total of cost-effective energy improvements, as well as the cost of the report and inspections, or

 - The lesser of 5% of:

                        - The value of the home, or

                        - 115% of the median area value of a single-family home, or

                        - 150% of the conforming Freddie Mac limit. Kind of confusing right here.

HERS, or Home Energy Rating System, report is the required paperwork to get one of these FHA EEM loans. In short, it verifies the cost of the improvements and figures out an estimate on the energy savings.

Typically, these improvements are installed after the mortgage loan closes while the lender has put the money into an escrow account. As soon as all the related equipment is up and running and verified, the funds are released. And now the savings can start accruing month after month to the forward-looking homeowner. The future in energy-efficient housing is now.