The Mortgage House is proud to be an Energy Star® Partner, and to be able to offer Energy Efficient Mortgages.  Energy Star® is a joint program of the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Energy (DOE).  These agencies are helping us all save money and protect the environment through energy efficient products and practices.

By partnering with the Energy Star® program, we promote and participate in the financing of homes that meet the EPA and DOE energy efficient standards.

For most families, buying a home means achieving the American dream, but with housing costs rising higher each year, it’s more important than ever to get the most for your home-buying dollar. After your mortgage payment, your monthly utility bills can be the next largest housing-related expenses. By spending less on energy bills, you could have more money available for your mortgage payments and be able to build equity in your home faster.

People tired of worrying about high utility bills or who want to minimize their home’s effect on the environment, are turning to an often-overlooked type of loan for relief.

Energy Efficient Mortgages (EEM) were introduced in the 1980's to help homeowners and prospective buyers pay for energy-saving home improvements, and have gained more attention recently.

Energy efficient homes may qualify for a special home mortgage process known as the Energy Efficient Mortgage. Purchasing an energy-efficient home or retrofitting a newly-purchased home to be energy efficient frees up money that would normally be spent on utility bills. This extra money can now be applied to a home mortgage. As a result, homebuyers may qualify for a higher home loan amount based on the additional money made available through these efficiencies. There are also benefits to the community in providing more affordable housing.

Additional benefits include:

• Increase borrowers’ mortgage qualifying income.
• Energy savings reduce monthly operating costs – energy efficient homes use state-of-the-art technology to get the most from the energy used, while using less energy for heating, cooling, and water heating may save up to 50% on home energy costs, as compared to a standard home.
• A more comfortable home in all seasons and climates, with warmer homes in the winter and cooler homes in the summer due to improved duct systems that provide balanced airflow to all of the rooms.
• Improved air quality – energy-efficient homes use less energy, so fewer emissions are created during the generation of power.
• 100% of energy improvements can be financed – up to 15% of the value of the home for existing homes and 5% of the home’s value for new construction.
• Quality assurance with required third-party energy rating reports.
• A tax credit based on a portion of the cost of the improvements may be available on some tax returns.
• An EEM will reduce greenhouse gas emissions by 2 to 4 TONS per year, which means everyone is breathing much easier every day!

EEMs can be used to:

• Purchase an existing home that is already energy efficient, based on verification by a qualified energy rater.
• Make energy efficiency upgrades when buying a non-efficient home, based on cost-effective recommendations resulting from a home energy rating.
• Be available in a refinancing transaction for homeowners that wish to make energy efficiency upgrades to their existing home.
• Help fund new construction.

Home Rating

Many existing homes are "energy hogs." If that is the case for your home, your energy bills may be higher than necessary. If you already own or are purchasing an existing home, it’s a smart investment to have your home evaluated to identify cost-effective, energy-efficient upgrades.

In order for a home to qualify for an EEM, your house must be rated for its energy usage. This energy rating evaluates the entire structure of the property, assessing the amount of energy used based upon:

• The amount and type of insulation in the home.
• Efficiency of the windows that are installed.
• Wall-to-window ratios.
• The solar orientation of the home.
• Types of appliances that are being used.
• The water heating system.
• The kind and quality of major energy-using components, such as the heating and cooling systems.

Performance testing, such as a blower door test for air leakage and duct leakage, is usually part of the rating. The higher the quality of the structure and the less amount of air leakage in the ducts, the better the energy rating the house will receive.

There are several ratings that can be given for energy usage. The most common rating is the Home Energy Rating System (HERS). The person performing the rating is either a certified rater or an energy auditor. They gather information from the property and input it into a computer program that generates a report. This report is used to rate the house and give it a score from 1-100 points, and correspondingly, from 1 to 5 star, with a 100 point/5 star rating designated for greatest efficiency. Not only does this report assess the current energy usage of the house, it also provides suggestions on ways to improve the energy efficiency of the home. It will even detail the estimated costs, savings and break-even points for each improvement.

The HERS report looks at aspects such as insulation, appliances, windows, local climate, and utility rates. The final report can include the following:

• Overall energy rating of the home as it is.
• Recommended cost-effective energy efficiency upgrades.
• Estimates of the costs, annual savings and useful life of upgrades.
• Improved rating score after the installation of the recommended upgrades.

To be eligible for the EEM, the proposed improvement must be cost-effective.
In other words, the monthly savings realized from the property’s utility bills must be greater than the added monthly cost of the EEM. Total savings must also be greater than the project’s total costs.

Homebuyers can also look for the U.S. Environmental Protection Agency’s (EPA) Energy Star® logo, which specifies that the home incorporates energy-efficient products and construction. All homes that meet the Energy Star® specifications will qualify for an EEM. You can also see their website at: www.energystar.gov

Loan Process

The actual loan process for an EEM is basically the same as that of a regular mortgage, along with the additional paperwork to determine the house’s rating eligibility.

The EEM is a great way to renovate and modernize your home, while at the same time conserving much-needed power resources. In addition to that, you would reap the reward of lower utility costs each and every month for as long as you own the home. Over the years, those savings can become quite substantial, even helping you along the way toward your financial goals.

Who Is Eligible for an EEM?

All buyers who qualify for a home loan can also qualify for an EEM. Availability for an EEM is not limited by location, price or the homeowner’s utility company. There is no limit on the borrower’s income for eligibility. An EEM can be provided through Fannie Mae (FNMA) conventional loans, government loans (FHA and VA), and jumbo loans. We can guide you to determine the best option for your particular situation. The EEM works with every type of financing, but different guidelines can apply for each variation.

Summary

Your home is a long-term investment, and for that reason alone, your home should be the most comfortable, most affordable house you can buy. If you take advantage of the EEM to purchase a new home or refinance an existing home, you could potentially reduce your utility bills 30% - 50% each year!

For those of you thinking about building a new energy-efficient home, there are financing benefits that encourage you to pursue the energy-efficient upgrades you might have thought to be too costly.

Contact Us

If you are interested in obtaining more information, or seeing if you and your property qualify for the Energy Efficient Mortgage loan program, please contact our EEM department at:

Kevin Hauber
Mortgage Banker & EEM expert
(800) 644-4030 toll-free
email Kevin at:  kevin@themortgagehouse.com

For more information on EEMs, please visit the following websites:

SLO Green Build
EEM Frequently Asked Questions
U.S. Department of Energy
Alliance to Save Energy
U.S. Department of Housing and Urban Development (FHA)
Department of Veterans Affairs (VA)