An Energy Efficient Mortgage (EEM) is a mortgage that credits a home's energy efficiency in the home loan itself. It allows the home buyer to use the monthly energy savings from the energy improvements in the home to help qualify for a larger loan. The lower monthly utility bill frees up money that can be applied to the mortgage. As a result, the homebuyer may qualify for a higher home loan by increasing his or her mortgage qualifying income. The money for the energy improvements is available to the home buyer up front. The EEM is used to pay for the improvements immediately following the closing on the loan. EEM's were introduced in 1992 to help homeowners and home buyers pay for energy-saving home improvements. They are available on conventional loans through FHA, Fannie Mae and VA loans.

There are two types of EEM's:

1) Energy Improvement Mortgages

This is a mortgage that would be used by someone who is buying an existing home that would benefit from energy improvements (also be used by a homeowner wanting to make energy improvements who is planning to refinance their home). For example, if an older home was being purchased that had poor insulation, an older low SEER AC unit and/or inefficient appliances, the EEM can provide money up front that would finance the energy upgrades. The cost of these upgrades would be added to the loan, being financially justified by the monthly savings on the lower energy bills resulting from the energy upgrades.

2) Energy Efficient Mortgages

These Energy Efficient Mortgages use the monthly energy savings from a new energy efficient home to increase the home buying power of the overall mortgage size. The energy savings can also be capitalized in the home appraisal. This is a great vehicle to help a builder market and sell their high energy efficient homes and to offer buyers lower monthly utility bills.

EEM's Can Be Used To:

1. Purchase an existing home that is already energy efficient (must be verified by a qualified energy rater).
2. Make energy efficient upgrades when buying a low-efficient home.
3. Refinance one's own home with plans to make energy efficient upgrades.
4. Help buy a new energy efficient home.

Who Is Eligible For An EEM And What Are The Requirements?

• All buyers who qualify for a home loan qualify for the EEM.
• Eligible properties are one to four unit existing and new construction.
• To be eligible for inclusion in the mortgage, the energy efficient improvements must be cost effective – the total cost of the improvements must be less than the total present value of the energy saved over the useful life of the energy improvements.
• The energy savings must be determined by a Home Energy Rater. The Energy Rater Report is prepared by the Home Energy Rater using the HERS system. The cost of the Energy Rater Report and inspections may be financed as part of the costs of the energy improvements.
• The energy improvements on existing homes are installed after the loan closes. The lender places the money in an escrow account and the money will be released to the borrower after an inspection verifies that the improvements are installed. The home buyer has 90 days to implement the energy improvements.
• The maximum cost of improvements that one can add to the EEM is either 5% of the property’s value (not to exceed $8,000) or $4000, whichever is greater.

The Process For Receiving An EEM And Installed Energy Improvements

• Find a mortgage lender who offers EEM's. You may contact Energy House Technology for our latest list of EEM lenders in the area (Info@EnergyHT.com).
• Have Energy House Technology (RESNET Certified) who carries the required insurance and has the experience, perform a HERS Rating on the home.
• Work with the Energy Rater to review energy efficient alternative measures that will result in the highest level of energy savings for the least amount of investment.
• Submit the Energy Rating Reports to the lender for review and approval. Upon approval, the money for the energy improvements are placed in an escrow account by the lender to be used for the improvements.
• After the loan is approved, the installation of the energy improvements can be implemented. These must be completed within 90 days of the closing of the mortgage. If you can demonstrate that you have the skills and ability to complete some of these improvements yourself in a satisfactory manner, your lender may allow you to complete the labor portion of the installations yourself.
• Have the implemented energy improvements inspected per the lender’s requirements.

Energy House Technology is a certified HERS Class 1 rater. We have the experience and expertise to guide you through the EEM process. We will work with you to outline the most cost effective energy improvements for your home. If you are considering buying a home that would benefit from energy efficient improvements, please contact us and we will help you with the energy rating aspects of the Energy Efficient Mortgage that will finance these improvements.

Ask about our FREE Home Energy Audit offer to be included with the EEM analysis!!