HERS service listWhat is an Energy Efficient Mortgage?
An Energy Efficient Mortgage (EEM) is a FHA/VA loan program that recognizes the energy efficiency of a home. When purchasing or refinancing an existing home, the EEM allows 100% financing of cost effective energy upgrades into the mortgage. The borrower does not have to qualify for this amount and no additional down payment is required. A HERS report is required to show which upgrades qualify as “cost effective”.
Why would a buyer use these programs?
By making energy efficient improvements to an existing home, the buyer benefits immediately.
- Live in a more comfortable and quieter home
- Lower utility bills making home ownership more affordable
- Home will be cooler in summer and warmer in winter
- Home will have increased value based on the improvements
- Upgrades are financed at the low mortgage rate
Who can qualify?
Anyone that qualifies for a FHA or VA loan will automatically qualify for the EEM. The EEM may be used with Sections 203b, 203k & 203k streamline rehabilitation programs, 234c condominium projects, and 203h mortgages for disaster victims for both purchases and refinances, including streamline refinances.
Who chooses the improvements included in the EEM?
The buyer always chooses the improvements to be financed. However, the package of improvements selected must be “cost effective”, defined as: When the savings over the useful life of the product are greater than the installed costs.
Will this cause a delay in closing the loan?
Using an EEM should not delay the loan process in any way. However, this process should get started as soon as possible after escrow has been opened.
When are the improvements installed?
The EEM improvements can only be installed after the close of escrow. The EEM funds can be held by the Lender or the Escrow Company in a hold-back account. When improvements are completed the contractors are paid from the escrow account. The improvements must be installed within 90 days (FHA) or 120 days (VA) after close. In most cases, the upgrades are completed within 7-14 days.
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