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Mark Scheets's blog

All About Energy Efficient Mortgages (EEM)

What is an Energy Efficient Mortgage?

Energy efficient mortgages or EEM’s are a type of loan that credits a home based on its current energy efficiency.  In order to be considered energy efficient, a tool, appliance, heating, or cooling system needs to simply use less energy than its basic, and less efficient, counterpart. An EEM gives lenders the power to extend the borrower’s debt-to-income qualifying ratio, which means that they may be able to take out a larger loan for their home. 

Insuring EEM’s

A Federal Housing Association (FHA) EEM provides mortgage insurance to the borrower who is looking to purchase or refinance their home and incorporate the costs of energy efficient improvements into their mortgage. The borrower does not have to qualify for additional money, and is not required to make a down payment on the EEM loan. 

The limitations put on the FHA EEM loan totals can change based on the cost of energy effective improvements a person makes to their home. The maximum amount that can fluctuate is whichever of these options is smallest. The lesser of 5% of: property value, 115% of the average single family home in the area, and Veterans Administration (VA) EEM’s.  The only limitations with VA EEM’s is that they are only available to veterans and qualified military personnel, and the loan cut offs are between $3-6000. ... read more

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