Energy Efficient Mortgages (EEMs)
FHA’s Energy-Efficient Mortgage (EEM) program was designed
to allow homeowners to cost-effectively make their homes more
energy efficient. The underlying concept of the EEM is that
a homeowner with an energy-efficient home will have to pay
less in utility costs, and, therefore, will be able to pay
a higher mortgage payment.
The EEM either provides the borrower with a higher mortgage
inclusive of a cost of energy improvements; or permits he
| she to borrow additional funds for energy improvements on
top of the original mortgage. The borrower does not have to
qualify for the additional amount, and no downpayment is required
for the additional amount used for energy improvements.
For example, if a borrower is purchasing a $100,000 home
and wishes to make an additional $5,000 of energy improvements,
the total cost of the home plus improvements would be $105,000.
However, the three percent down payment is calculated only
on the first $100,000, not the full $105,000.
The amount that can be borrowed for energy improvements is
either five percent of the home’s value, or $4,000,
whichever is greater, up to a maximum of $8,000. The cost
of improvements, and an estimate of the amount of savings
that can be derived from them, is determined by an energy
consultant.
The cost of the consultant can be financed along with the
energy improvements. The improvements will be approved so
long as the cost of the improvements is less than the savings
that will be derived over the lifetime of the improvements.
The improvements are not made until after the closing, at
which time the funds are placed into escrow, and then released
after the improvements have been installed.
The additional energy improvement funds, like the original
loan itself, is provided by a lender and guaranteed by FHA.
|
