By Sequoia on 05/29/2010 – 4:06 am PDT

The Energy Efficient Mortgage (EEM) offered through the Federal Housing Administration (FHA) and its qualified lenders allows homeowners to receive a larger mortgage to improve the efficiency of a home. Essentially, this mortgage covers not just the initial cost of the property but also the cost of energy improvements. As a result, the loan can exceed standard FHA limits. The FHA provides this option with the understanding that the utility costs of the home will be far lower after improvements, allowing the homeowner to pay more toward a mortgage.

EEM Process
The process to secure an EEM is similar to the process to secure any FHA-insured loan. You must first qualify for a private mortgage loan, and then you must apply for the FHA guarantee. When you are working with an FHA-qualified lender, you can do both at once. The FHA guarantee is a form of insurance on your loan. To qualify, you must be deemed credit worthy. The FHA’s standards are among the highest in the industry. However, the FHA does assist with low down payment options. Through this program, you can purchase a home with as little as 3.5 percent down, and you are guaranteed a fixed-rate mortgage.

EEM Home Inspection

Once you qualify for the loan, the home you are purchasing must also qualify for the energy improvements. The process to qualify a home takes place through an efficiency inspection. Inspectors factor in the various considerations for the property, such as the year it was built, the quality of insulation and the appliances present. Inspectors then carry out a test where air is blown through the home to measure the ducts and ventilation. Ultimately, the inspectors input all of the information into a computer program to generate a Home Energy Rating (HER).

HERS Rating

The Home Energy Rating System (HERS) is an index based on a reference created in 2006. If a home is equal to this reference point in terms of efficiency, the home receives a HERS score of 100. A net zero home, meaning a house that creates all the energy it uses, will score a HERS rating of 0. The home under inspection will be rated somewhere along this scale or beyond this scale. Then, the inspectors will estimate what the home’s HERS rating will be based on several improvements to increase the efficiency of the property. The cost to make these improvements is added to the mortgage.

Benefits of an EEM Loan

Many EEM users are eco-conscious, and they desire to live in a home that has a lower impact on the environment. Even if you are not extremely “green,” there are several fiscal benefits to the larger mortgage. Theoretically, you will be spending the same amount on the home either way, since the extra mortgage will be covered through utility savings. If this is the case, then you will net a gain as a result of the improvements. Homes that are energy efficient sell at higher prices. The updates and changes to the home will put money in your pocket when it comes time to sell.

By Sequoia on 05/28/2010 – 4:49 am PDT

The Energy Efficient Mortgage, or EEM, is a type of mortgage program that is offered by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) and Freddie Mac and Fannie Mae loans. Individuals can utilize this type of loan when they are purchasing a new house that is considered energy efficient. They can also use this type of mortgage to purchase a house that they are planning to make energy efficient.

One of the big benefits of this type of mortgage is that lenders allow a different debt-to-income ratio when qualifying borrowers. This allows people to purchase larger homes with this type of program. They will be able to borrow enough money  to purchase the property itself and pay for the necessary upgrades to make the home energy efficient.

Popularity

This type of mortgage  has become very popular because of the increased emphasis on green products. More people are concerned with the environment than ever before, and this mortgage provides an incentive for people to purchase energy-efficient homes.

Requirements

In order to get this type of mortgage, you are going to have to meet some requirements. For example, if you are working with the FHA, you have to make a 3.5 percent down payment. The costs of the improvements have to be less than the value of the energy that is going to be saved over their lifetimes.