Energy Efficient Mortgage

What is a GREEN mortgage?  It is also called an ENERGY EFFICIENT MORTGAGE (EEM)

THE ENERGY EFFICIENT MORTGAGE means savings and comfort. When you are selling, buying, refinancing, or remodeling your home, you can increase your comfort and save money by using the Energy Efficient Mortgage (EEM). It is easy to use, federally recognized, and can be applied to most home mortgages. EEM’s provide the borrower with special benefits when purchasing a home that is energy efficient, or can be made efficient through the installation of energy-saving improvements.   It also provides the seller benefits by attracting more attention in an already competitive market to help your home sell quicker and makes your home more affordable.

Home owners with lower utility bills have more money in their pocket each month. They can afford to allocate a larger portion of their income to housing expenses. If you have more cash, why not buy a better, more comfortable home?

The options with Energy Efficient Mortgages In Phoenix, Arizona
How the Buyer, Seller and Remodelers benefit from an Energy Efficient Mortgage in Phoenix, AZ
This is how the EEM Works in Phoenix, AZ
Which Buyers and homes are eligible for the EEM in Phoenix, AZ
What the EEM does for the buyer's borrowing power
What is HERS (Home Energy Rating System) and recommended improvements?
EEM Process for Existing Homes in Phoenix, AZ
Adding Energy Home Improvements through a Home Refinance in Phoenix, AZ
Case Studies and examples of how the program works in Phoenix, AZ

It is advantageous to have the HERS Rating done as early in the Energy Efficient Mortgage loan process as possible. This way, the Rating can be performed while other aspects of the loan are being processed. Closing the loan should not be delayed. You may get a larger tax deduction with the EEM because the interest on mortgage payments is tax deductible. This can save you more money than paying for energy upgrades with a credit card, bank loan, or cash, none of which are usually tax deductible.

Each house is as unique as its owner. Benefits derived from the EEM will vary from one house to another, the benefits in the examples in the may not apply in all cases. Sun Nations Mortgage will be your best source of information on your own EEM benefits.  

     THE OPTIONS OF AN ENERGY EFFICIENT MORTGAGE IN ARIZONA

After you have reviewed if you are eligible , the process involved and benefits, let's look at your loan options:

• NEW CONSTRUCTION
• NEW PURCHASE of an existing home and making ENERGY EFFICIENT IMPROVEMENTS
• REFINANCE current home and making ENERGY EFFICIENT IMPROVEMENTS

   

NEW CONSTRUCTION

Coming soon!
NEW PURCHASE of an existing home and making ENERGY EFFICIENT IMPROVEMENTS

Conventional Loan Programs (Fannie Mae and Freddie Mac) permit the use of higher housing expense to income and debt to income ratios (up to 2%) if the home is energy efficient or contains energy efficient items.  They also add the cost savings of energy improvements to your income which allows you to qualify for more home. 

EXAMPLE:  For every $1 saved in monthly utility costs, you can qualify for an additional $60 to $70 in upgrades / loan amount.  So if you save $74 a month on your electric bill you can qualify for $4,810 without effecting your qualification.  Also, $74 will be added to your monthly income and will allow you to qualify for a larger loan amount.  

You include the actual energy improvement costs into the purchase price of the property – up to 15% of the purchase price.  So if you are buying a $250,000 home you can add up to $37,500 in energy saving improvements.

Manufacturer appliance rebates can be used towards closing costs.  Tax credits, where available can be used towards borrower’s income. 

If the improvements are not completed prior to close…an escrow account can be established for up to 10% of the value for completion of the upgrades and need to be completed within 120 days of loan closing.

CASE STUDY:  You make $5,000 a month & have a car payment of $350 a month and a credit card of $35 a month.  You want to know what you qualify for:

You qualify for more and have a more energy efficient home!!!

FHA
The maximum cost of improvements that you can add to the mortgage is either 5 percent of the property’s value (not to exceed $8,000) or $4,000, whichever is greater. For example, if your property’s value is $75,000, the maximum cost of improvements allowed is $4,000 because this is greater than 5 percent of the property value. If your property’s value is $100,000, the maximum amount of improvements allowed is $5,000 because this is 5 percent of the property’s value, greater than $4,000 but less than $8,000. Finally, if your property’s value is $250,000, the maximum cost of improvements allowed is $8,000, which is 5 percent of the property value and the maximum allowed overall.

If the improvements are not completed prior to close…an escrow account can be established for completion of the upgrades and need to be completed within 90 days of loan closing.

VA ENERGY EFFICIENT MORTGAGE

On a VA Energy Efficient Mortgage the maximum loan amount is the lower of the appraised value or purchase price minus the down payment if any.  You then add in the cost of the Energy Improvements based on the HERS report plus the funding fee.  Your base mortgage amount may be increased by:

*less than or equal to $3,000 with the copy of the bids / contract itemizing the improvements and their costs.

**greater than $3,000 to $6,000 – same documentation as above with determination that monthly mortgage payment increase does not exceed the reduction in monthly utility costs.  Documented determination made by municipalities, utility companies, state agencies or other reliable sources.

***Greater than $6,000 – Discretion must be exercised.  Including the above requirements consider whether veteran’s income will cover the higher monthly payment.  Subject to value determination by VA.

 The Funding Fee will be calculated based on the costs of the Energy Efficient Improvements and the full loan amount.

Entitlement and Guaranty:  Entitlement used will be based on the loan amount before adding the cost of Energy Efficient Improvements.  The 25% required guarantee will be based on the total loan amount including improvements.

If the improvements are not completed prior to closing….an escrow account may be set up and the loan closed.  The following will apply: 

*Only the amount needed to complete the improvements may be withheld.

*Check the appropriate block on VA Form-26-1820.  Item 23.  Report and Certification of Loan Disbursement
*Improvements should be completed within (6) six months form loan closing

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REFINANCE OF CURRENT HOME making ENERGY EFFICIENT IMPROVEMENTS

Conventional Loan Programs (Fannie Mae and Freddie Mac) permit the use of higher housing expense to income and debt to income ratios (up to 2%) if the home is energy efficient or contains energy efficient items.  They also add the cost savings of energy improvements to your income which allows you to qualify for more home. 

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