Energy Efficient Mortgages - EEMs

Since 1995, HUD has been providing mortgage insurance to help persons incorporate the cost of energy efficient improvements into a purchase or refinance mortgage. One way to reduce your spending is to cut the cost of your utility bills. And replacing those drafty windows and leaky ducts might be easier than one thinks.

Am I eligible?

In order for the borrower and the property to qualify for an EEM, certain requirements must be met. These include:

• The borrower must be able to make a 3% cash investment in the property, based on the sale price
• The home must be an existing and new 1 to 4 unit building
• The energy-efficient improvement must be greater in cost than 5% of the property's value, or $4000
• The improvements must be cost effective; that is, their total cost must be less than the total value of the energy saved over the life of the energy improvements
• The cost and estimate of the energy savings must be determined by a home energy rating report performed by a home energy rating system or energy consultant
• The improvements must be installed after the loan closes. After which, the borrower must place the money in an escrow account to be released after an inspection confirms that the improvements have been installed.

How does it work?

EEMs are insured by HUD, and loans are funded by private lenders in order to enable homebuyers to afford energy-efficient and money-saving home improvements on newly purchased homes.

What are the alternatives?

EEMs are the only Federally insured mortgage loans designed to help homebuyers make environmentally sound and cost-effective decisions when purchasing a home. You may inquire at your local lender if you wish to learn about local programs assisted by nonprofit organizations.

Do I really need this type of loan?

As a Federally insured program, EEMs offer homeowners the ability to make cost-effective energy improvements to a newly purchased home. Having the help of an EEM can save you money on utility bills and help to reduce pollution. If you're looking to purchase a home that you'd like to make energy-efficient improvements on, an EEM may be your best option for financing.

Can I afford it?

As stated above, you need to be able to afford a 3% cash investment on the property, as well as monthly mortgage payments.