There are many different types of mortgages from which a home buyer can choose. Each loan product has different features and requirements so it is important to find the right loan for your individual circumstances. One interesting loan product that some home buyers may not be familiar with (or have possibly never heard of!) is an Energy Efficient Mortgage. With an energy efficient mortgage or “green” mortgage, you may be able to afford more house with reduced mortgage fees or by rolling energy efficient improvements into the mortgage. Homeowners can get an energy efficient mortgage for purchasing a new home build that is energy efficient or when purchasing an older home to which energy efficient improvements will be made. Energy.Gov elaborates on how an energy efficient mortgage (EEM) works, “Homeowners can take advantage of energy efficient mortgages (EEM) to either finance energy efficiency improvements to existing homes, including renewable energy technologies, or to increase their home buying power with the purchase of a new energy efficient home. The U.S. federal government supports these loans by insuring them through Federal Housing Authority (FHA) or Veterans Affairs (VA) programs. This allows borrowers who might otherwise be denied loans to pursue energy efficiency, and it secures lenders against loan default…Loan amounts may not exceed the projected savings of the energy efficiency improvements…Borrowers may include closing costs and the up-front mortgage insurance premium in the total cost of the loan.”
An EEM is a loan program that is backed by both private and government mortgage programs. Many homeowners have found that, although their loan amount is a bit more and their mortgage payment a small amount higher each month, the savings they see by making energy efficient improvements actually saves them a significant amount of money each month. To acquire an EEM, borrowers usually have to have a home energy rater visit the home and conduct a home energy rating in order to get financing approved. Once approved, a borrower’s buying power will be increased which expands their housing options when shopping around for the perfect home. This is a great choice for many borrowers but particularly so for first-time home buyers because it is one way to expand your purchasing power and waive common mortgage fees so that you can get into the home that you want. There are conventional, FHA and VA EEMs available depending on your individual circumstances so it is important to speak to a qualified mortgage lender when researching energy efficient mortgages.