Different Programs, Similar Goals

You may be surprised to learn that Energy Efficient Mortgages have been in existence for more than 20 years, but have only recently come into the spotlight as more people look for simple changes they can make that will have a big impact on the environment. There are currently a range of Energy Efficient Mortgage programs available in most states, and they can vary a bit depending on the location. Despite some small differences, however, the overall premise behind most EEM programs is the same. Here are three of the basic EEM programs and some highlights of how they operate:

Conventional Energy Efficient Mortgage

These loans, which can be accessed through mortgage providers that sell their loans to Fannie Mae and Freddie Mac, are added to a traditional fixed- or adjustable-rate mortgage to pay for specific energy improvements when you buy a new home or refinance an existing one. You may finance up to 15 percent of the home’s value to cover the expense.

FHA Energy Efficient Mortgage

The Federal Housing Authority insures Energy Efficient Mortgage loans for first-time home-owners and those with lower incomes who meet their criteria. This program, which is available through many banks, credit unions, mortgage companies and other lenders, is also a good option for people living in disadvantaged neighborhoods where they might otherwise have trouble getting financing. In addition, this loan can be used for manufactured homes. Keep in mind that there are limits on the size of the mortgage amount that qualifies under this federally backed plan that vary by location. It is also important to note that the costs of the improvements are also capped at either $4,000 or 5 percent of the home’s value up to $8,000, whichever is the higher amount, so this is a more limited program than the more conventional plan but is more accessible, too.

Veterans Administration Energy Efficient Mortgage

If you are an active member of the military, or are in the reserves or a veteran, you may be able to take advantage of the Veterans Administration (VA) EEM. Again, this program is more limited than a conventional loan, but allows you to finance 100 percent of improvements that will net a greater cost savings over the first year than the additional loan payment amounts. The amount you can borrow for this program is capped at $6,000.