Energy Efficient Mortgage Program

• Introduction to the Energy Efficient Mortgage
• Questions & Answers
• Energy Efficient Mortgage Summary
• Download Energy Efficient Mortgage Brochure

• Increase your purchasing potential while saving money
• Conserving energy and the environment

Questions & Answers

What is the Energy Efficient Program (EEM)?
The Energy Efficient Mortgage Program is a nationwide program developed by President Jimmy Carter to allow FHA, VA and Conventional loans to add 100% financing of energy improvements into the base loan during the purchase or refinancing of a home.

No Additional income qualifying or added Cash Down?
Once the borrower qualifies for the base loan amount, they automatically qualify for the “Cost Effective” energy improvements with no additional income qualifying or added cash down.

Can appraisal compliance issues be covered with the EEM?
Yes! During the escrow period, most lenders will accept the EEM documentation as an appraisal compliance correction for items listed in the Energy Efficient Mortgage eligible improvements

One loan - No Other Liens or Loans on Property?
Yes! There is just one loan on the property. The cost of the energy improvements is layered into the base loan with no additional loans or liens on the property.

How Much Can I Expect To Save on Utilities a Month With Energy Improvements?
According to United States Department of Energy, the national average of energy saving may be up to 50% a month on heating and cooling costs and up to 30% on the annual utility cost. And, because the cost of the energy improvements becomes part of your mortgage, the interest maybe IRS tax deductible.

What Is An HERS Energy Report?
Imagine buying a car without knowing what kind of gas mileage it gets.
You really do not want to buy a house without knowing its energy efficiency.
A HERS (Home Energy Rating Service) Report documents and certifies the homes energy use. An energy inspection is performed by a HERS Rater who will prepare a detailed written report that gives a valuation of the homes use of energy, calculates the existing conditions and recommends energy and money saving improvements and upgrades

What’s Cost Effective?
Based on the HERS energy report, to be “Cost-Effective”
The monthly energy saving must be greater than the increase of monthly payment

Do I Have To Use a Different or Special Lender or REALTOR?
NO! You can use your favorite FHA approved mortgage company and REALTOR. Synergy is not a mortgage lender; we do the documentation and project administration.

Is There a Time Limit?
YES! Once escrow closes, it is too late to request the Energy Efficient Mortgage Program. Synergy can promptly supply your mortgage lender with all necessary required Energy Efficient Mortgage documentation to assure that there is no delay in the loan process or closing escrow.

How to Start the Process?
As soon as possible after you have an accepted purchase offer, give Synergy a call and let your REALTOR and lender know that you want to take advantage of the Energy Efficient Mortgage Program option.

What Improvements are Eligible?
The following is a list of improvements that can be added to the Energy Efficient Mortgage Program, providing the calculations find them “cost effective”. Actual improvements cannot be identified until an HERS energy report has been performed. The following list will provide you with a better understanding of the potential opportunities to improve the comfort, value and reduce the operating expense of a home:
    Central Heat & Air
        Replace Old Non-efficient Central with a High Efficiency Unit
        Replace Old Wall Heat & Window Air with New Central Heat/Air
        Replace Old Wall Heat with New Energy Efficient Wall Heat
    Windows
        Replace Single Pane Windows with Dual Pane Windows
    Hot Water Heater
        Replace old Water Heater
    Attic – Wall Insulation
        Insulation is one of your most important Energy Saving Improvements
    Doors
        Exterior Insulated Solid Core Doors and Dual Pane Sliding Glass Doors
    Other Available Energy Savers
         Test and Seal the home & ductwork for Leaks
         Weather Stripping & Caulking,
        Interior and Exterior Florescent Lighting
    Solar & Renewables
        Because the cost of Solar & Renewables usually exceed the funds available within the Energy Efficient Mortgage, the installed cost of Solar and Renewables may (at the lenders discretion) be financed within the Streamline 203(K) Program.

When is the Energy Improvements Installed?
After the home records, the contractors can immediately start installing the energy improvements. The average installation should be completed within 2 to 3 weeks. Once completed the EEM funds are then be disbursed to the contractors

What does Synergy do for the buyer and mortgage lender?
Because of the specific and required lender documentation, calculations to justify cost and energy savings, gathering of installation bids and the required completion dates, most Lenders advocate that Synergy completes the Energy Efficient Mortgage process from start to finish.

SUMMARY Energy Efficient Mortgage Program

Mortgagee Letter 2005-21 - HUD’s Energy Action Plan and Energy Efficient Mortgages
Link: Mortgagee Letter 2005-21 

Mortgagee Letter 2009-18 - Increase in Dollar Amount of Energy Improvements.
Link: Mortgagee Letter 2009-18

Eligible Loan Types: PURCHASE & REFINANCE
Most FHA & VA loans– Existing Residential - Purchase or Refinance – Owner Occupants - NO Investors
Refinancing: the new monthly payment of P& I including the cost of the energy improvements must be lower than the monthly P & I on the current mortgage, including rate reduction streamline refinance. No cash-out re-finance

Program Guidelines:
FHA: 5% of Purchase Price: See Mortgagee Letter 2009-18
VA: Up to $6,000 + veteran may request additional funds for energy improvements
100% Financing of “Cost Effective” eligible energy improvements
No Additional Liens: The total of the energy improvements is layered into the base loan amount
Loan Limits may be exceeded by the total cost of the energy improvements

Qualifying Borrower:
Borrower automatically qualifies for “Cost Effective” Energy Improvements
The borrower does not need to income-qualify for the additional energy improvement financing or
The borrower does not need to provide additional down payment.

Appraisal:
Appraisal is automatically increased by the amount of the energy improvements. There is no need for a second appraisal; the increase of property value is calculated by the underwriter or loan processor.

Weatherization Items: Financing Additional Energy Improvements:
FHA: When the maximum allowed under the Energy Efficient Mortgage does not cover the cost of the entire energy package, For existing properties, energy-related weatherization items (see handbook HUD 4155.1, Rev 5,1-7(C)(2) for maximum additions to the mortgage amount) may be combined with the Energy Efficient Mortgage. The weatherization amount would be the cost of the improvements not covered by the EEM amount.

Repairs are Installed After the Close of Escrow:
The Energy Efficient Mortgage funds are held in an Escrow Holding Account until all energy improvements have been completely installed. A Notice of Completion is issued and the Contractors are paid

Cost-Effective:
Cost Effective means, the energy savings must be greater than the increase of the payment
Cost Effective must be calculated and based on a Certified HERS Energy Rating

HERS Energy Audit (Rating):
The Lender required Certified Energy Rating is usually a Buyer cost. Payment pre-arrangements “must be made” with the Rater before HERS Rating is ordered: 1) may be paid at time of Rating, 2) may be paid in escrow as a closing cost or 3) May be made part the EEM costs

Potential Energy Improvements:
Following is a list of improvements that can be added to an Energy Efficient Mortgage, providing the calculations find them “cost effective”. Actual improvements cannot be identified until an energy audit (rating) has been performed on the home by a certified HERS (Home Energy Rating System) provider. Only then based on the existing condition of the home can the actual improvements be identified. The following is not a complete list, but one that will provide you with a better understanding of the potential opportunities the Energy Efficient Mortgage has to improve the comfort, value and reduce the operating expense of a home.

 
 » Download Print Version: Summary Energy Efficient Mortgage Program

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Disclaimer: Information on the Synergy web site is compiled from what we regard as publicly available information. The information is solely for review. Synergy accepts no responsibility for the validity of the information although it is compiled from sources we believe to be accurate and reliable.

Synergy Homebuyer Service is a proud member of:
Sacramento Association of Realtors
Woman’s Council of Realtors
EcoBrokers
Path – HUD Partnership for Advancing Technology in Housing
California Department of Real Estate Continuing Education Class
RESNET

Call 1-916-453-1718 Pacific Time 9 am to 5 pm or contact us online eem@softcom.net