What are Energy Efficiency Loans and Mortgages?

“Energy Efficient Mortgages,” also known as EEMs, make it easier for borrowers to qualify for loans to purchase homes with specific energy-efficiency improvements. Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs.

Conventional Energy Efficient Mortgages

Conventional EEMs can be offered by lenders who sell their loans to Fannie Mae and Freddie Mac. Conventional EEMs increase the purchasing power of buying an energy efficient home by allowing the lender to increase the borrower’s income by a dollar amount equal to the estimated energy savings. The Fannie Mae loan also adjusts the value of the home to reflect the value of the energy efficiency measures.

New Construction Energy Efficient Mortgages

In addition, new construction loans are available in certain circumstances.

FHA Energy Efficient Mortgages

FHA EEMs allow lenders to add 100 percent of the additional cost of cost-effective energy efficiency improvements to an already approved mortgage loan (as long as the additional costs do not exceed $4000 or 5 percent of the value of the home, up to a maximum of $8000, whichever is greater). No additional down payment is required, and the FHA loan limits won’t interfere with the process of obtaining the EEM. FHA EEMs are available for site-built as well as for manufactured homes.

VA Energy Efficient Mortgages

The Veteran’s Administration (VA) EEM is available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. The VA EEM caps energy improvements at $3,000–$6,000.

Fannie Mae

Fannie Mae has developed a detailed brochure targeted to consumers on the benefits of an energy efficient mortgage. The brochure, “Energy Efficient Mortgages: Save Money, Conserve Energy, Live Comfortably” covers the following areas:

1. Why are energy efficient homes better?
2. What is the difference between energy efficiency and energy conservation?
3. The value of energy efficiency?
4. Is your existing home leaking energy dollars?
5. Did you know that a new home does not necessarily mean an energy efficient home?
6. How do I find an Energy Rater?
7. Save energy and reduce costs with an Energy Efficient Mortgage
8. Who qualifies for an Energy Efficient Mortgage?
9. Want an Energy Efficient Mortgage! What is the next step?