Its been around for a few years, but rarely used… the Energy Efficient Mortgage. You can add this to a VA or FHA loan (including the 203K, which we’ve blogged about before), and use it for both home purchases and refinances.
Capped at $8,000 for FHA loans and $6,000 for VA loans, a borrower can get an additional 5% of the home price on the loan for use in financing energy efficient improvements on the home. Additional debt incurred in your monthly payment is excluded in your qualifying ratios, so what essentially will be saved in energy costs will be more than the increased mortgage payments.
What types of improvements are typical? Replacement windows, increased (or higher quality) insulation, conversion to gas heat, central air conditioning, sun lights, solar panels, and energy saving appliances. Of course, there are other options, too!
For more detail about this type of loan, check out the HUD Energy Efficient Mortgage Home Owner Guide or talk to your lender. If you don’t have one, contact us and we’ll suggest some that we highly recommend!