FHA loans can help you not only make your home 'Green', but save you money. Saving money is a great thing in any economy, right?  Don't you like to know about the little secrets of cutting corners? How would you like to save over $200 a month just because you improved your home with energy-efficient ideas. 

Are you part of the GREEN family now, because not only did you save money, improve your home, but because you are helping the environment? And did you know that this can be done without spending extra money out of pocket as possible.

How about that this is a great way for a realtor or a seller to market their home also. Especially for those homes that are 5 years or older. You can also refinance your current mortgage by using this program.

HUD states that Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEMs. (Energy Efficient Mortgages)  FHA has adopted this into their financing options which allows a borrower to :

• save money monthly
• incorporate the improvement costs into the mortgage
• these improvements are installed after the loan closes
• this program allows you to use normal FHA guidelines with FHA mortgages
  

EEM's recognize that reduced utility expenses will allow a homeowner to pay a higher mortgage payment to cover the cost of the energy improvements that were financed into the mortgage. A main reason behind the EEMs program offers homeowner's who couldn't initially afford the cost of these energy saving improvements out of pocket, giving them the chance to finance them. Thus cutting down on pollution and making the environment a better place to live.

Eligibility Requirements

• Properties that are eligible are One to Four unit existing and new construction properties.
• Borrowers are approved through the normal FHA guidelines for obtaining a mortgage.
• The cost of the energy-efficient improvements that may be eligible for financing into the mortgage is greater of 5 percent of the property's value (not to exceed $8,000) or $4,000 - whichever is greater.
• To be eligible for this mortgage, the energy efficient-improvements must be cost effective, meaning that the total cost of improvements is less than the total present value of the energy saved.
• The cost of the energy improvements and the energy savings must be determined by a home energy rating report which is done by a home energy rating system (HERS) or energy consultant. The HERS report usually costs from $150 to $350 and can be paid by the seller, the buyer, or sometimes included into the mortgage.
• The energy improvements are installed after the loan closes. The money is placed into an escrow account and is released once an inspection verifies the improvements are completed and that the savings will be achieved.
• Because of this program, the final loan amount can exceed the maximum mortgage limit by the amount of the energy-efficient improvements. Here is a list of the FHA max mortgage limits.

Asterisk *-- MIP now varies depending on credit scores. FHA Mortgage Insurance One-Time MIP 

** -- Monthly payment does not include taxes or homeowners insurance.  Just Principal & Interest (P & I)

*** -- As you can see, it's not a huge savings, but it does add up. Just in 1 year only you saved $708. And the cost of the energy improvements that were added onto your mortgage now become a tax write-off.

Along with the FHA loans for these EEMS, the VA(Veterans Administration) and FNMA / FHLMC also back these types of programs with their own guidelines.

Department of Energy (DOE) and HUD established a joint response to energy efficient housing. 

Author of this blog is : Jeff Belonger  The FHA Expert

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Copyright © 2008 by Jeff Belonger