The FHA Energy Efficient Mortgage program (EEM) helps families save money on their utility bills by enabling them to finance energy efficient improvements with their FHA-insured mortgage.
An energy-efficient home will have lower operating costs, making it more affordable for the homeowners, and with lower utility bills, more income is available for the mortgage payment.
Background
Under its EEM program, FHA Insures a borrower’s mortgage used to purchase or refinance a principal residence, and the cost of energy efficient improvements to be made to the home. The borrower need only qualify for the loan amount used to purchase or refinance a home. The borrower is not required to be qualified on the total loan amount with the portion of loan used to finance energy efficient improvements.
Energy Package
The energy package includes the set of improvements that the Borrower chooses to make based on the recommendations and analysis performed by a qualified home energy assessor. These improvements can include energy-saving equipment, and active and passive solar and wind technologies, as well as materials, labor, inspections, and the home energy assessment by a qualified energy assessor.
Improvements must be Cost-Effective
The financed portion of an Energy Package must be cost-effective, which means the cost of making improvements must be equal to or less than the money saved on energy from those improvements.
Home Energy Assessment
The Borrower must obtain a home energy assessment to identify opportunities for improving the energy efficiency of the home and their cost-effectiveness.
The assessment must be conducted by a qualified energy rater, assessor, or auditor using whole-home assessment standards, protocols and procedures. Qualified home energy raters/assessors must be trained and certified as one of the following:
• Building Performance Institute Building Analyst Professional
• Building Performance Institute Home Energy Professional Energy Auditor
• Residential Energy Services Network Home Energy Rater
How much of the Package can be Financed?
The maximum amount of the energy package that can be added to the borrower’s regular FHA loan amount is the lesser of:
A cost-effective improvement to be made (energy package) based on the home energy assessment; or the lesser of five percent of:
• the Adjusted Value;
• 115 percent of the median area price of a single-family dwelling; or
• 150 percent of the national conforming mortgage limit.
An FHA-approved lender can access FHA’s EEM Calculator to determine the maximum dollar amount a borrower can finance for energy improvements.
Complementary Energy-Related Programs and Policies:
1. Section 203k Rehabilitation Mortgage
<hud.gov/program_offices/housing/sfh/203k> EEM may be combined with any FHA Title II mortgage, including the Section 203(k) Rehabilitation Mortgage Insurance program. The 203 (k) program allows borrowers to finance a variety of home improvements, repair or modernization projects. An Energy Package from an EEM can be layered on top of the improvements to be made under the 203 (k) program.
2. Energy Efficient Homes (EEH)
When the home being financed meets minimum energy efficient standards, FHA permits the borrower's qualifying ratios to be "stretched" by two percentage points above the standard limits. This stretch recognizes energy savings, and allows a borrower to qualify for a higher loan amount. The stretch ratios permitted for an Energy Efficient Home may be used with any FHA insurance Title II program, including Energy Efficient Mortgages, and Section 203(k) Rehabilitation Mortgages.
3. Solar and Wind Technologies
Under FHA's Solar and Wind Technologies policy, borrower can have a higher mortgage amount in order to pay for the cost and installation of new solar or wind energy system. A new solar or wind system must be made at the time of home purchase or refinance.
4. Weatherization
FHA's Weatherization policy allows borrowers to finance up to $3,500 to pay for basic weatherization items, such as thermostats and insulation.
How to Get a EEM
To apply for an FHA insured energy efficient mortgage, contact an FHA approved lender <hud.gov/program_offices/housing/sfh/lender/lenderlist> .
For More Information
Visit the FHA Resource Center <hud.gov/program_offices/housing/sfh/fharesourcectr> to search the FAQs, ask a question or send an e-mail.
