Who can get an Energy Efficient Mortgage?

A borrower who is buying or refinancing an energy-efficient home.

An Energy Efficient Mortgage (EEM) allows you to buy a more expensive home than you could have otherwise. An energy-efficient home incurs significantly lower monthly utility costs than its non-energy-efficient counterpart. Less money spent on heating and cooling each month leaves a larger percentage of your income available for your mortgage. Therefore, a lender may approve you for a larger mortgage than they would otherwise.

The borrower.
It does not take a special buyer to obtain an Energy Efficient Mortgage. If you can qualify for a conventional mortgage, you can qualify for an EEM.

The home.
Although it does not require a special buyer, an Energy Efficient Mortgage does require a special house. To see if the house you’re interested in qualifies, you must have a HERS report (Home Energy Rating System) done. Similar to the miles-per-gallon rating on a car, the report tells you how energy efficient a home is. In a HERS evaluation, several factors are examined:

• the home’s insulation,
• the efficiency of the appliances,
• the types of windows,
• the local climate, and
• the utility rates.

A trained Energy Rater conducts a HERS report and provides the home’s overall rating, recommends upgrades, indicates what the improved rating score will be after upgrades and estimates total energy used before and after upgrades. The lender uses this information to determine whether to give you an Energy Efficient Mortgage.

Additionally, improvements that make a home more energy efficient can sometimes qualify for an Energy Efficient Mortgage. If you will save enough money monthly to make it worth it, some lenders will consider increasing your loan to pay for renovations that will make your home energy efficient. These changes will often increase your home’s resale value as well.

Before applying for an EEM, take the time to figure out if one is right for you. Add up the current cost of utilities for the home. Next, estimate how much the cost will be after energy improvements. If it means significant savings, then an Energy Efficient Mortgage may be a good choice for you.