Home loans for energy efficient houses

Energy efficient mortgages pay you to save on costs

The costs of owning a home are high - besides the payments and interest, there are taxes, upkeep, insurance and a host of other expenses. One of the most expensive costs of owning a home these days is the cost of heating and cooling it. The cost of natural gas, heating oil and electricity have all increased in the last couple of years to astronomical rates, making it more and more difficult to own a home.

The Federal government does have a bit of a plan to help people conserve energy. Since 1982, mortgages offered through and backed by Fannie Mae and FHA/VA have rewarded those who purchase energy efficient homes or modify existing homes to be more energy efficient. These mortgages, known as Energy Efficient Mortgages (EEM), can help people afford to buy more expensive houses than they otherwise would be able to afford.

The theory behind these mortgages is that if you are not having to pay a lot for your utility bills, then you will have more money available to pay on your mortgage.

For example, someone buying an existing home that is not energy efficient can take out an FHA loan that will include a sum of up to $8000 to upgrade the home to being more energy efficient. On homes that are already energy efficient, loan amounts can be increased by adding more flexibility to the usual debt-to-income guidelines used by lenders to determine whether or not a borrower will qualify for a loan.

In order to obtain the financing for a Energy Efficient Mortgage, a borrower must first subject the home to an analysis known as HERS - Home Energy Rating System. This evaluation of the property must be conducted by a state or Federally approved professional energy rater who will examine the home for overall efficiency. The examiner will look at insulation, windows, heating and cooling systems and air leakage. The rater will provide a report that offers an overall assessment of the home along with estimated annual costs of heating and cooling and overall energy use. The report will also include a list of recommended improvements as well as the estimated savings that such improvements would yield if implemented.

So, in short, the program works like this:

The cost of adding energy savings to a new home or an existing home may be financed through the mortgage.

• The costs may run as high as $8000, depending on the home and its energy rating.
• The house must receive a score through the Home Energy Rating System and must be evaluated by a professionally certified energy rating professional.
• The program is limited to one and two unit new or existing homes. These must be standalone houses or duplexes; condominiums are not eligible under the plan.

All in all, these energy efficient mortgages represent a great opportunity for consumers to purchase either more home than they otherwise might if buying a house that is already energy efficient, or to convert an existing house to one that will be more affordable in day to day living in the future. Either way, this program could benefit thousands of Americans, if only it were better known.

Further information about energy efficient mortgages can be found at the Website of the Federal Citizens Information Center.