An Energy Efficient Mortgage (EEM) is a mortgage that recognizes a home's energy efficiency in the mortgage itself.  EEMs give the borrower an opportunity to finance cost-effective, energy-saving measures as part of their
mortgage and stretch debt-to-income qualifying ratios on loans.  This can allow a borrower to qualify for a larger loan amount AND have a more energy-efficient & comfortable home.

There are two basic types of EEMS.  The EEM which is most often used to purchase a new home that is already energy efficient such as an ENERGY STAR qualified home, and an EIM that is use to purchase an existing home that will have energy efficiency improvements made to it.

EEMs allow you to finance a more expensive energy-efficient home and EIMs allow you to include the cost of energy-efficiency improvements to an existing home in the mortgage, all without increasing down payments.  EEMS and EIMs allow the borrower to use the money saved in energy bills to finance the energy improvements.

Though they have been available for years, EEMs are still new types of loans for most lenders. Lenders may be less than enthusiastic to talk with a borrower about them but both types are proven lending instruments.  Both EEMs and EIMs require a HERS Rater rate the home to verify for the lender that the home is energy-efficient (or will be when done) and provide the estimated monthly energy savings and value of the energy efficiency measures — known as the Energy Savings Value.  Ratings are significantly more reliable than the typical "audit" that the lender may have seen in the past.

EEMs and EIMs are recognized and accepted by both the federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac).

PACE LOANS are a new type of loan available to Maine residents that live in participating municipalities.   Available through Efficiency Maine, they are similar to EEMs but NOT a mortgage.  PACE Loans are like home equity loans and secondary to a mortgage.  PACE Loans are limited to $15,000.

FHA POWER SAVER LOANS are another new type of loan that are expected to be available to Maine residents shortly.  It appears that Efficiency Maine is working with AFC First Financial Corp and the DOE Better Buildings Program to bring this product to all of Maine, including municipalities that do not participate in the PACE Loan program.  PowerSaver is an insurance program from the Federal Housing Administration (FHA) that will provide federal loan insurance and other incentives to participating lenders to deliver low-cost home energy improvement loans. Homeowners will be able to borrow up to $25,000 for terms of 15 years (up to 20 years for certain improvements) to make proven home energy improvements of their choice, based on a list developed by FHA and the U.S. Department of Energy (DOE). PowerSaver has begun a nationwide two-year pilot program.  For many consumers, PowerSaver loans may be less expensive and easier to access than other kinds of financing for home improvements, such as credit cards and home equity loans because FHA is providing mortgage insurance and other incentives to lenders to lower costs for homeowners. 

CONVENTIONAL ENERGY EFFICIENT MORTGAGES can be offered by lenders who sell their loans to Fannie Mae and Freddie Mac. They increase the purchasing power of borrowers buying an energy efficient home by allowing the lender to increase the borrower's income by a dollar amount equal to the estimated energy savings.  The Fannie Mae loan increases the value of the home to reflect the value of the energy efficiency measures.

FHA ENERGY EFFICIENT MORTGAGES will also increase the mortgage loan amount by the cost of effective energy improvements.  maximum amount of the portion of the EEM for energy efficient improvements
is the lesser of 5% of the value of the property, or 115% of the median area price of a single family dwelling, or 150% of the conforming Freddie Mac limit.  No additional down payment is required, and the loan limits won't interfere with the process of obtaining the EEM. FHA EEMs are available for site-built as well as for manufactured homes.

VA ENERGY EFFICIENT MORTGAGES are available to qualified active duty military personnel, reservists and  veterans for energy improvements when purchasing an existing home. The VA EEM caps energy improvements at $3,000 to $6,000. Borrowers must be sure to ask their lender about a VA EEM at the beginning of the lending process.

To learn more please contact MABEP HERS.  We are not lenders but if asked, we will try to put you in contact with lenders that are familiar with energy-efficient mortgages and can help.  We have discovered that due to the current housing and lending crunch, most web sites do not have current information so you will have to do some investigation to best take advantage of these mortgages.