Energy Efficient FHA Loans
Incorporate Improvements Into Your Loan
The Energy Efficient Mortgage Loan program helps current or potential homeowners significantly lower their monthly utility bills by enabling them to incorporate the cost of adding energy efficient improvements into their new home or existing housing. This FHA program eliminates the need for homeowners who are interested in making their home more energy efficient to take out an additional mortgage loan to cover the cost of the improvements they intend to make to their property. The program is available as part of a FHA insured home purchase or by refinancing your current mortgage loan.
It is our government's goal to make energy efficiency and conservation a way of life. The FHA Energy Efficient Mortgage Loan program contributes to these efforts by providing better housing and creating a way for homeowners to make valuable improvements to their homes at a relatively low cost. The Joint Center for Housing Studies has reported that by considering the amount of monthly savings on utility bills when determining the amount of the mortgage, over 250 thousand more homeowners could feasibly qualify for a home loan.
HOW IT WORKS
Through this and other types of mortgage insurance programs, the lender helps low and moderate-income families purchase homes by keeping the initial costs down. By serving as an umbrella under which lenders have the confidence to extend loans to those who may not meet conventional loan requirements, FHA mortgage insurance allows individuals to qualify who may have been previously denied for a home loan by conventional underwriting guidelines. It also protects lenders against loan default on mortgages for properties that include manufactured homes, single-family and multifamily properties, and some health-related facilities.
AVAILABLE ASSISTANCE
The Energy Efficient Mortgage Loan program is one of many FHA programs that insures mortgage loans. Borrowers who qualify for FHA's popular Section 203(b) fixed-rate mortgage loan may finance up to 96.5 percent of their home loan. They are also able to fold their closing costs and the up-front mortgage insurance premium into the total cost of the loan. Energy Efficient Mortgages can also be used with FHA Section 203(k) rehabilitation program; in this case the Energy Efficient Mortgage generally follows the Section 203(k) rehabilitation program's financing guidelines.
ELIGIBILITY
The Energy Efficient Mortgage Loan program is available to anyone who meets the income requirements for FHA's Section 203(b) and is able to make the monthly mortgage payments. The cost involved in adding energy efficient features to the home and an estimate of the energy savings must be determined by a home energy rating system or a qualified energy consultant. Up to $200 of the cost of the energy inspection report may be included in the mortgage. Cooperative units are not eligible. Individual condominium units may be insured if they are not in projects that have been approved by FHA or the Department of Veterans Affairs, or they meet certain Fannie Mae guidelines.
ELIGIBLE ENERGY EFFICIENT ACTIVITIES
Energy Efficient Mortgages can be used to make energy-efficient improvements in one- or two-unit existing and new homes. The improvements can be included in a borrower's mortgage only if their total cost is less than the total dollar value of the energy that will be saved during their useful life. The cost of the improvements that may be eligible for financing as part of the mortgage is the lesser of 5 percent of the property's value, 115% of the median area price of a single family dwelling or 150% of the conforming Freddie Mac Limit. View the currentFHA loan limits.
FHA Loan Programs
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FHA Loan Articles and Mortgage News
September 18, 2023 - First-time homebuyers and experienced homebuyers who have never applied for an FHA mortgage may wonder whether they can use an FHA mortgage in certain situations. We examine some of the allowed and disallowed uses for an FHA mortgage in this article.
September 17, 2023 - Credit scores and what it takes to be approved for a mortgage are among the most frequently asked-about topics related to FHA home loans. What does Experian recommend a borrower do to better qualify for an FHA mortgage or any other type of home loan?
September 16, 2023 - Some think the question of buying a home in 2023 is absurd. They look at the high interest rates we see at press time compared to the rates available a year or two ago and wonder why anyone would purchase a home under current conditions.
September 15, 2023 - How much money should a first-time home buyer save for a down payment? It depends on the type of home loan you want, whether you want to avoid mortgage insurance, and whether your FICO scores are high enough to qualify for the lowest down payment.
September 12, 2023 - CBS News MoneyWatch published an article in the last days of August 2023 noting that mortgage rates are hovering in the 7% range, with no real end in sight to the higher interest rates reported at press time. This article lists some of the top ways you can get a lower mortgage rate.
