Energy Efficient Mortgage


What is Energy Efficient Mortgage (EEM)?


Energy Efficient Mortgages (EEM’s) are mortgages that credit a home’s Energy Efficiency within the mortgage. Their typical use is to purchase new homes that are already energy efficient like Energy Star Certified Homes.

Whether you’re buying, selling, or refinancing your home, you can take advantage of EEM’s. Buyers can qualify for a larger loan on a better home, save money from day one, and increase potential resale value. Sellers who make energy efficient upgrades and take advantage of EEM’s are likely to sell their homes quicker. Tbey are also able to attract more attention in a competitive market. Remodelers and refinancers can make improvements that will save their money and increase the potential resale value of a property.

The term EEM is commonly used to refer to all types of Energy Mortgages: Energy mortgages that are sponsored by the Federally Insured Mortgage programs, Conventional secondary mortgage market, and EIM’s.

The different types of EEM’s available are:

Conventional EEM

The difference between EEM and EIM:

Energy Improvement Mortgages (EIM’s) are often used to purchase a home in which Energy Efficient Improvements will be made by the home buyer.
EEM’s are typically used to purchase a new home that is already Energy Efficient.

Conventional EEM’s

Conventional EEM’s allow the lender calculate the Estimated Energy Savings of a home. Then, to increase the borrower’s income by that amount when considering the buyers Debt-to-Income (DTI) ratio. Although they do allow underwriting flexibilities for energy efficient improvements, Freddie Mac does not currently offer EEM’s.

Federal Housing Administration Energy Efficient Mortgage (FHA EEM)

You may increase this mortgage loan in relation to cost effective energy improvements made to a home. There is No additional down payment requirement. Also, the process of getting an EEM isn’t hindered by FHA loan limits.

The maximum allowable amount of the portion of the EEM is calculated as 5% of either:
The value of the property.
115% of the median area price of a single family home.
150% of the conforming Freddie Mac limit.

The lesser of the three is the max amount chosen.

More information on the specifics of an FHA EEM <–.

Department of Veterans Affairs Energy Efficient Mortgage (VA EEM)

As with a VA backed home loan, a VA EEM is available to qualified military personnel, veterans, and spouses. Its purpose is to help with making energy improvements when purchasing an existing home. Note, VA EEM’s have a gap amount from $3,000 to $6,000. Borrowers who will be looking for an EEM from a VA backed loan should bring this up at the beginning of their application and lending process.

More information on VA EEM <–.

Any type of Energy Efficient Mortgage will require a Home Energy Rating completed by an Energy Rater before approval of the financing.