Energy Efficient Mortgage Program

Energy Efficient Mortgage Program

July 17th, 2019 | FHA Loans, Government Loans

The federal government has aimed to help increase homeownership for decades. One of the Federal Housing Administration’s many programs to help Americans in their homeownership dreams is the Energy Efficient Mortgage program (EEM). Many homes, especially older ones, could be much more affordable if they were updated to be more energy efficient. The EEM allows borrows to make those updates and save money as new homeowners.

The Department of Housing and Urban Development (HUD) first created the Energy Efficient Mortgage program in 1992 and piloted it in five states. It was extended to all states in 1995. The idea behind the initiative was that “cost-effective energy improvements can lower utility bills and make more income available for mortgage payments.”  Essentially, borrowers can better afford to be homeowners if they don’t have to pay as much in utility costs. The EEM program pays for the energy updates that can bring down those costs.

How It Works

Potential borrowers find an FHA-approved lender and apply for an Energy Efficient Mortgage. The lender will actually process and fund the loan, but then the FHA will insure it for the lender. Once the borrower has found a property, the lender will first order a home energy assessment. This is conducted by a qualified energy rater and it determines the type of energy efficiency updates that can be made and how much they might save the borrower. This assessment could turn up update options like adding solar or wind technologies, thermostats or insulation. 

The borrower then chooses the desired improvements, creating what is called the “energy package.” The lender estimates the total cost of the energy package which include labor, materials, inspections and the home energy assessment fee.  This energy package must be determined to be cost-effective, meaning total energy package amount that can be added to the home loan cannot exceed the projected savings.

Up to 100% of the energy package can be financed with the mortgage loans as long as it is less of 5% of one of the following: 115% of the median area price for a single family dwelling, 150% of the national conforming mortgage limit, or the adjusted value of the property. Borrowers are allowed to include closing costs and mortgage insurance premiums in the loan total.

How To Qualify

Borrowers must be able to meet the FHA Section 203(b) income requirements and must be purchasing a new or existing home with the intention to personally occupy it. Other qualifications may be required by individual lenders as well.

Interested borrowers can contact their lender and inquire about the Energy Efficient Mortgage program. For those who qualify, it can be a great way to make the dream of home ownership a reality.


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Prime 1 Bancorp, Ltd is not affiliated with any government organization or bank nor do we act on behalf of the FHA or VA. This material is not from HUD or FHA and has not been approved by HUD or a government agency. We are not a Federally chartered or State Chartered Bank. We are an we are an Illinois Residential Mortgage Licensee by the Office of Banks and Real Estate License #MB.6761138, a Colorado Registered Mortgage Brokerage by Division of Real Estate, a Florida Residential Mortgage Brokerage Licensed by the Office of Financial Regulation License #MBR1930 dba Prime 1 Mortgage Inc, a California CFL Licensed Mortgage Brokerage by Department of Business Oversights 60DB055973 and a Texas SML Licensed Mortgage Brokerage by the Texas Department of Savings and Mortgage Lending. Prime 1 Bancorp, LTD Corporate Office is located at 2720 S. River Rd Suite 50, Des Plaines, IL 60018 our Toll Free Number is 888-205-3737. NMLS: 1434638

Loan product availability is subject to qualification of the borrower and loan approval after full review of the file. Not every applicant qualifies or is eligible for every loan program. Some loan products may not be available in all states. Loan approval, note rate and annual percentage rate are dependent on factors including, but not limited to, credit, collateral, income, assets and overall financial history. Not all applicants will be approved for a loan. All loan programs, terms and annual interest rates are subject to change without notice. NMLS: 1434638