Energy Efficient FHA loan? What’s that?

This particular federal lending program enables current and potential homeowners to greatly reduce their monthly utility expense. Sound pretty good so far? I’ll take that as a yes.

In a previous entry, we’ve mentioned a few possible ways to finance for solar power. Some of those aforementioned include our own program called SunPower Smart Financing, using personal line of credits, as well as tapping into a federally supported energy-efficient mortgage.

Let’s dig deeper for more details on the latter-most option mentioned. The Energy Efficient Mortgage Loan allows homeowners to add the cost of energy efficient improvements to their new or existing home.

This reduces the headache and financial stress that may be induced by having to take out an additional mortgage loan to pay for the improvements.

Luckily, we live in a country that supports energy efficiency and conservation. In fact, it’s partially the government’s duty to help the people live in a greener, healthier, and more affordable environment. This is why the government has rolled out a lending program that allows homeowners to not only make valuable improvements to their home, but to also provide homeowners with that opportunity at a relatively low cost.

More and more homeowners are able to qualify for home loans because of the utility savings. Is this a pretty good incentive? It definitely wouldn’t hurt to look into.

FHA helps families who have low to moderate income purchase homes with as little as 3% down. If you’re looking to own a home and also fall into this income bracket, this may be a very beneficial option.

So how exactly are you eligible?

You can qualify for the Energy Efficient Mortgage Loan if you meet the income requirements denoted in FHA’s Section 203(b). This is coupled by your capability of paying for the monthly mortgage just like any home loan.

Of course, you can’t just simply state that you plan to add energy efficient systems and/or improvements to your home and expect to be immediately approved.

The government requires two numbers to be generated. The first is the cost of adding the energy efficient systems and/or improvements which may include installation fees and component parts. The second is an estimate of the amount of energy that will be saved if these features are added.

In order to calculate these values, an energy rating system or a qualified energy consultant is required to be acceptable.

If the cost of the improvements is less than the energy saved, then the improvements can be included in the homeowner’s mortgage. Also, with any type of borrowing, there is usually a limit.

Improvements that are eligible for financing are either 5 percent of the property’s value which cannot exceed $8,000, or $4,000. The amount allowed is in favor of the value that is greater of the two.

If you are a homeowner or are looking to own one soon and is interested in adding energy efficient improvements to your home, this is a great option and possibility to look into.

At The Solar Company, we want to be as informative and helpful as possible so if you have questions, let us help you find the answer!