10 Things You Should Know about the Energy Efficient Mortgage

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Fixing infiltration problems is a good reason to finance with an Energy Efficient Mortgage.

The Energy Efficient Mortgage is waiting for you to come calling. It's the best mortgage product that almost nobody knows about. I've written about it a number of times here in our blog, spoken about it at conferences, done a webinar on it, explained it to people till I'm blue in the face — well, OK, I guess I've never had my face turn blue, but it's something I am passionate about.

So, for all of you reading this who've never heard of Energy Efficient Mortgages (EEMs) or who have heard of them but don't know much more or who know a lot but maybe still don't get that they're for you, here's my list of things you should know about the lonely EEM.

  1. You can probably qualify for $5000 to $15,000 in energy improvements with an EEM.
  2. There's an extra $2000 available for 'weatherization' that you can add to the EEM energy improvement amount.
  3. Your home will be more comfortable after the work is done because you'll probably be getting your home air sealed, thus eliminating drafts.
  4. A high percentage of existing homes are good candidates for EEMs.
  5. Window and HVAC replacement often aren't cost-effective enough to include in an EEM but can be covered as long as the whole package is cost-effective (and you qualify for enough money to include them).
  6. A home energy rater who knows the process is crucial to the success of the EEM energy improvement work. If they know what they're doing, the closing doesn't get delayed, the pricing is accurate, and they act as project manager to ensure that everything that's supposed to happen actually happens — on time!
  7. Even though you're borrowing more money, you don't have to pay a higher down payment. The energy improvement package is excluded.
  8. Passive and active solar energy systems (water heating, photovoltaics...) can be included.
  9. As energy costs rise, the value of the energy efficiency improvements rises. Each year, you save even more money!
  10. The home energy improvements you make can help you qualify for thousands of dollars in rebates and tax incentives.

What are you waiting for!? If you're buying a home or refinancing, you should definitely look into doing it with an Energy Efficient Mortgage.


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Watch Our Energy Efficient Mortgage Webinar


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M. Johnson
Sep 9 2011 - 9:12am

Thanks Allison for telling us about this. Although I had vaguely heard about the EEM, did not realize it was a well defined, structured product. And I consider my self a (debt-adverse) energy nerd. With more publicity this product should grow as it deserves.

Andrew J. Courts Jr.
Sep 9 2011 - 12:27pm

Thank you for your tireless support of EEMs. Have also spent countless hours promoting EEMs and have completed well over 50 of them. Once a loan officer realizes the benefits and can get an underwriter on board, usage increases. Most used for appraisal issues such as outdated/inoperable hvac. There is a automatic approval for "no heat" 
Biggest hurdle are slow to understand Realtors who want nothing to do with anything that may slow closing. Working the NAR or local and State asscociations may yield better results.  
The best thing about the EEM is that you can do a streamline refinance with no appraisal, no credit check and no closing costs(wrapped into rate) except for HERS fee. Have had success with HVAC replacement with dual fuel and duct replacement.  
Wells Fargo appears to be the best prepared and willing to write them.

Lily Perkins-High
Sep 9 2011 - 1:09pm

Informative post! Thanks. 
You might be interested in reading a related article on our blog about the effect of energy efficiency improvements on property value, which seems related, especially to reason #9. Here's the link: http://blog.wegowise.com/blog2/bid/88599/The-Effect-of-Energy-Efficiency... 

Jason Payne
Sep 9 2011 - 1:45pm

Great list, and thanks for helping spread the word. It really is the most "no brainer" loan out there. 
Andrew - Nice to see others out there making things happen! FYI- Wells Fargo still has the old cap of $8,000 as an overlay, and that has made a few that we have done very difficult to fit in all of the necessary and desired improvements. I would encourage you to try and get some local direct lenders on board as well. They have more flexibility in their underwriting guidelines, and, depending on the location, they can approve as much as $30,000 for deeper retro-fits.

Chris Bellanca
Sep 9 2011 - 3:23pm

Allison, in your experience, what are the top improvements that qualify?

Sam Young
Sep 9 2011 - 6:08pm

Allison: The EEM concept is appealing and I like it, but it has proven to be incredibly frustrating for me as a HERS Rater. I've worked on two. 
When I finished my first one, my client was so unhappy with result they refused to pay me. They wanted the money for improvements they wanted to make, not the difference between the building code and better energy efficiency. 
When we tried to apply it to new construction, the convoluted path I had to take to make the mortgage processor and real estate agents happy was very involved and perplexing to say the least. 
If someone wants an EEM and asks me for it, I will help them. However, I'm not going out of my way to promote them. I don't need to invite headaches! 
The biggest complaint I've heard about them is that there are better and cheaper mortgage products to achieve the same result. 
When this product becomes more attractive in the market place, I'll probably spend more time with it. Until then . . .

Dustan Shepherd
Sep 15 2011 - 3:10pm

Allison nice article, as a FHA 203k specialist I use the EEM as a stand alone FHA product or as an add on to a 203k. However, I find that many times there are additional items such as siding or roofing that is also requested by the borrower thus I put all the repairs inside of a 203k standard or streamline. HUD still had the cap of $8,000 in the credit manual until earlier this week and they implement a mortgagee letter that noted the manual was outdated and all interested parties should head over to the EEM page at HUD.gov to see the most current guidelines. I am also working with the National Energy Retrofit Institute (watch the video at http://youtu.be/6HUXGpTo9jU) at Central Missouri University to expand the EEM not only in the Kansas City market but nationally as well. Trust me there is money to be made working with the EEM while making a genuine impact on the ecology and the economy

Canada Goose Parka
Sep 29 2011 - 9:46pm

Thank you for sharing your great article and I like it very much. Welcome to Canada Goose Parka.