Energy Efficient Mortgages Get Boost From New Housing Bill

While we are still combing through the new 800 page housing bill, we have noticed a few huge items designed to increase the market for energy efficient mortgages. Previously, FHA EEMs allow lenders to add 100 percent of the additional cost of cost-effective energy efficiency improvements to an already approved mortgage loan (as long as the additional costs do not exceed $4000 or 5 percent of the value of the home, up to a maximum of $8000, whichever is greater). No additional down payment is required, and the FHA loan limits won’t interfere with the process of obtaining the EEM. The new rule eliminates that $8000 cap and changes it to 5% of the purchase price / appraised value of the home. On a home that sells for $300,000 that means you can get $15,000 of energy efficient improvements with having to qualify for the additional debt to income produced by the higher loan amount or putting the extra down payment that would also be required by the higher loan amount.

The bipartisan proposal was put forward by Sens. Jeff Bingaman and Pete Domenici, chair and ranking member of the Senate Energy Committee. Here’s what they had to say about the amendment…

Sen. Bingaman: “With high energy prices expected to continue, a streamlined energy efficient mortgage process would make energy efficient new homes and energy retrofits much more attractive to builders and consumers. Promoting energy efficient homes will reduce the amount of energy we consume in our homes while also helping mitigate the effects of global warming.”

Sen. Domenici: “American homes serve as the front-line for improved energy efficiency. I’m pleased that the bill managers have accepted our amendment to identify obstacles that are making it more difficult to build, buy or renovate energy efficient homes. In this time of rising energy costs, we should do everything possible to help people use less energy — and spend less money.”

Along with that, the bill also releases more money dedicated to the funding Energy Efficient Mortgages. Expect to see more and more incentives coming in the near future as lenders AND consumers start to understand the importance of going green at home.