$17,000 Tax Credit For Energy Efficient Homes: Homes For Sale in AZ

FHA ENERGY EFFICIENT MORTGAGE

The program is called the FHA energy efficient mortgage.  It allows for approved energy efficient items to be financed into the loan amount.  Once installed the buyer receives tax credits and rebates to cover a large portion of the cost.  The best part is, the borrower doesn't have to qualify for the extra monthly payment created by the energy efficient items being added to the mortgage.  The rationale being that the energy efficient items will reduce the operating costs of the house which will offset the slightly higher mortgage payment.  Here is the actual wording from the FHA handbook:

"While the energy package may be financed into the loan, the borrower does not need to qualify with the additional financing or provide additional down payment." 

Here is how the rebates and tax credits work.  You can get money from three different sources if you buy a home and install qualifying energy efficient systems, namely solar energy systems for generating electricity and solar systems for heating water.  There are other qualifying items like better doors and windows but we will keep it simple and just use these big ticket items for our example.   The three sources of rebates and tax credits are:

·         Federal Government   They will give a tax credit equal to 30% of the cost of installing the system.

·         State of AZ                 They will give a tax credit equal to 25% of the cost of installing the system, capped at $1000.00

·         SRP or APS                These utility companies will give you a per watt rebate of $1.35/watt with SRP or $1.45/watt with APS.  These are capped at 5000 watts.

Here is the way it would work if you installed a 5KW (5000 Watt) system from SRP.  According to SRP the cost for this size system would be approximately $27,000.  The rebates would be as follows:

Federal Tax Credit of 30% of the cost.                                              $8,100.00

State of AZ Credit of 25% of the cost capped at $1000.00              $1,000.00

SRP rebate at $1.35 * 5000 Watts                                                      $6,750.00

Total of tax credits and rebates                                                          $15,850.00

The SRP (or APS) rebate you will get in about 30-60 days after the installation.  The state and federal funds are tax credits so you get them when you file your taxes. 

 So if it costs $27,000 upfront, how do you pay for it when you buy the house?  You can use the FHA energy efficient mortgage. In this example, if you only qualify for a 100,000 FHA mortgage it's possible to get a $127,000 FHA mortgage to cover the improvements assuming that the entire $27,000 in improvements are approved energy efficient items and are determined to be cost effective in reducing utility bills for the property.

So in our example, you can buy a house for $100,000.  Add $27,000 of energy efficient improvements and finance that entire amount for a mortgage of $127,000.  Then you can get back $15,850 in rebates and tax credits.

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