Energy Mortgages are a new finance product for home buyers. These mortgages take into consideration the energy efficient improvements made—or to be done—to a new or existing home. The home buyer may qualify for a larger mortgage when taking into consideration the yearly energy savings with an energy efficient home purchase. Homes with solar panel energy systems or where a solar photovoltaic system can be installed can qualify for these programs.
Energy Efficient Mortgages (used to finance homes that are already energy efficient), and Energy Improvement Mortgages (used to improve the efficiency of existing homes) are available through the FHA Energy Mortgage Program, Veterans Administration Energy Mortgage Program, Freddie Mac Support for Energy Conservation and the Freddie Mae Energy Improvement Feature Program.
Energy Efficient Mortgages (EEM) can be used to finance energy efficiency improvements to existing homes, including a solar residential installation, or to increase their home buying power with the purchase of a new energy efficient home which may have solar panels. In addition, FHA will allow buyers to purchase a new home whose prices exceed FHA limits by allowing buyers to finance the energy improvements above the appraised value of the home when the resulting energy rating of the home purchased is documented to exceed the Model Energy Code.
The energy rating of the home to be financed through an Energy Mortgage is determined by the Home Energy Rating System (HERS), based on the 2006 International Energy Conservation Code and established by the Residential Energy Services Network (RESNET). The lower a home’s HERS Index, the more energy efficient it is. A home that produces as much energy as it uses scores a HERS Index of 0.
A list of tests a certified RESNET Home Energy Rater will do can be found here. The rating will include recommendations on improvements as well as the relative economic return on of these improvements. Once approved for an Energy Efficient Mortgage, the funds for the improvements are placed into an escrow account and the buyer has a minimum of three months after closing to make the improvements.
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