Energy Efficient Mortgages - How to save money monthly - Part 1 - FHA Loans going 'Green'

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saving money with energy efficient mortgages, known as EEM loans

Energy Efficient Mortgages aren't talked about much, which some might think they aren’t as good as a regular FHA loan. In my opinion, it’s because many loan officers and or lenders don’t know much about them. Yet there is no huge difference between the two. And one could easily associate an energy efficient mortgage with a FHA 203-k loan. But that would be a very bad assumption, because there isn’t much more to an energy efficient mortgage, known as an EEM loan, as opposed to the paperwork and understanding that goes into a 203-k loan.

Do you have high energy bills? Unless you are having a new home built that could be an energy efficient home, in many cases, the older home probably won’t be up to the current standards, which could cost you hundreds of dollars monthly. So how can you over come this problem? Very easily with an EEM loan.

Quick history about EEM’s -  Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEM’s. (Energy Efficient MortgagesEEM’s recognize that reducing 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 is because it offers homeowners who couldn’t initially afford the cost of these energy saving improvements out of pocket, giving them the chance to finance them. These loans can be both done when purchasing a new home or when refinancing. 


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


How does the Energy Efficient Mortgage program work?

The maximum amount of the portion of the EEM for energy improvements is the lesser of 5% of:

  • the value of the property
  • 115% of the median area price of a single family dwelling
  • 150% of the conforming Freddie Mac limit.


Eligibility Requirements

  • Properties that are eligible are One to Four unit existing and new construction properties.
  • Borrowers are approved through the normal FHA mortgage guidelines for obtaining a mortgage.
  • The cost of the energy-efficient improvements that may be eligible for financing into the mortgage is the lesser of 5 percent of the property’s value, depending on 3 different equations. Please refer to these changes above.
  • 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 $250 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.



comparing energy efficient mortgages against regular FHA loans










***I am not using a particular credit score and all closing costs are the same for either loan example.***

As you can see, it’s not a huge savings, but it does add up. Just in 1 year you saved $1,135.20. And the cost of the energy improvements that were added onto your mortgage now become a tax write-off.

**** My examples in the cost of improvements and your monthly bills, will vary depending on several different factors, such as age of air conditioner or heating, lighting fixtures, etc, etc. And also depending on what you pay per month. I only used these figures as examples.****


Reminder : There are special and certain tax credits both nationally and locally. For tax purposes, there is a $1,500 tax credit until the end of the year. Not sure if the government is going to extend this. There are also state credits and sometimes credits given by your utility companies. Just be careful though, because sometimes you have to use those they recommend when doing the energy inspection report.


Realtors : If your referring mortgage partner or in-house lender doesn't educate you on this kind of mortgage, either ask questions or possibly seek someone that understands this type of financing and who is very creative.  An excellent loan officer is not always one that can close your loan or who calls back, but one who can do all of the above and provide excellent education and program scenarios. This will not only make happy buyers, but possibly provide more referrals. For more education and creative financing, please vist FHA loans & other mortgage options


Here is a link to a list of the past mortgagee letters for everything about Energy Efficient MortgagesFHA Energy Efficient Mortgages – Mortgagee Letters


Energy Efficient Mortgage Series

Energy Efficient Mortgages – EEM loans – Part 1 of 2 – FHA loans going ‘Green’

Energy Efficient Mortgages – EEM loans – Part 2 of 2 – VA loans going ‘Green’


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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 11/19/2010 12:43 AM
  2. Gerry Suarez Jr. 11/19/2010 05:32 AM
  3. Markita Woods NMLS#196099 11/22/2010 01:53 AM
  4. Pam Dent 11/22/2010 02:23 AM
Lending / Financial
New Jersey Camden County Cherry Hill
All About Mortgages/Mortgage Networking
1st Time Buyers
The FHA Mortgage Group
green loans
fha loans
energy efficient mortgages
energy efficient home
green financing
eem loans
energy efficient loans
green fha loans

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Cynthia Grimes
eXp Realty, LLC - Westminster, MD
"With You Every Step Home!"

Your post provided me with information that I did not know about.  Thank you!

Nov 18, 2010 11:27 AM #1
. 4Terra Land Brokers .. 828-776-0779 Asheville NC
What's Most Important to YOU? Call(828)-776-0779


I am working with a couple who are set on investing in an older home and already have qualified fro an FHA Loan...I will be sure to pass this post on to them. I SUGGEST they take your good advice =)

Nov 18, 2010 12:27 PM #2
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC


Thanks for sharing the information of the FHA Energy Efficient Mortgage, it has alot of potential for saving a homeowner money monthly.

Good luck and success.

Lou Ludwig

Nov 18, 2010 12:49 PM #3
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


CYNTHIA... . my pleasure and I hope it helps some.. and FYI.. we can help in MD also.. thanks

JANEANNE... . perfect timing... if their loan officer doesn't know much about this, I can help point them in the right way.. thanks

LOU... .  my pleasure and yes, there can be a tone of savings, depending on the work that might need to be done.. thanks


Nov 18, 2010 02:04 PM #4
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Jeff...I was with you for part of this informative meeting.  I can't believe all that this program offers.  Further, I can't believe that this could be summarized any better!  Great info on a great product that can improve efficiencies and lower costs.  This needs to be featured!

Nov 18, 2010 02:49 PM #5
Barbara Chatterton
The Stark Company Realtors, Madison WI - Madison, WI
Greater Madison Wisconsin Area Realtor

This was excellent, Jeff.  I had no idea.  Oopps!  Maybe I shouldn't admit that but there is a lot out there I am wiling and ready to learn.. My loan officer for a buyer and I are getting ready to tussle with  Freddie tomorrow regarding her FHA and this short sale and ....wish us luck!

Nov 18, 2010 03:25 PM #6
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Jeff, I too had no clue about this kind of loan.  I'm re-blogging this one.

Nov 19, 2010 12:41 AM #7
Debbie Rumsey
HomeSmart Realty West, Carlsbad, CA - Encinitas, CA
Realtor, Green, SFR

Thank you Jeff for this post.  I knew the loans existed, however, your post answered many of my questions.  I will reblog!

Nov 19, 2010 05:47 AM #8
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Simply amazing Jeff!

Nov 19, 2010 12:53 PM #9
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


LARRY... . I actually knew all about this prior to that call... but yes, this kind of info needs to get out there... and lastly, thanks for the kind words and for the compliments.

BARBARA.... . hey, no worries about not knowing about this kind of mortgage. But loan officers should be educating the realtors,especially their referal partners. And if this loan officer is not sure of this program, I have a very good loan officer in the Wisconsin area that can help.  I was just an hour south of Green Bay back in August,,,, have many relatives throughout wI and in the Chicago area..

GABE... . as I told Barbara, no worries... this is why I love blogging, educating others and realtors.. thanks and thanks for reblogging this.

DEBBIE... . my pleasure and I am glad that this post answered many of your questions... and I look forward to your reblog, thanks.

RENEE... . thanks for that very polite compliment...


Nov 19, 2010 03:24 PM #10
Markita Woods NMLS#196099
Fairway Independent Mortgage - Woodbridge, VA
Queen of Mortgages - FHA, VA, Conventional, USDA
Jeff thanks for the summary about this program which is under the radar. But as the world goes GREEN this should become more popular with loan officers that actually know about the loan, like you! I am reblogging your post.
Nov 22, 2010 01:50 AM #11
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
REALTOR® - Charlottesville Virginia Homes / Horse

Jeff - I have just started to hear about this program and really didn't know much about it.  Thank you for getting me up to speed.  I am reblogging this post.

Nov 22, 2010 02:09 AM #12
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


MARKITA.... my pleasure... it's been under the radar ever since I found out about it in 1994 or so... and thanks for reblogging this..

PAM... . there are a few of us, Mortgage Myth Busters, who will be pushing this loan.  and thanks for reblogging this.


Nov 22, 2010 03:58 AM #13
Jim Paulson
Progressive Realty (Boise Idaho) - Boise, ID
Broker / Owner - Progressive Realty Corporation

Thanks for posting.  I am searching out and reading up on these programs for Boise, Idaho.  I found two reblogs first but came to bookmark your original post.

Jan 17, 2011 04:51 PM #14
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