Energy Efficient Mortgages
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A version of this article appears in the March/April 2009
issue of Home Energy Magazine.
March 09, 2009
Of all the topics I've written about for Home Energy, energy-efficient mortgages (EEMs) have generated the most questions. There seems to be a lack of understanding about this Federal Housing Administration (FHA) program among home buyers, lenders, and real estate agents. For home buyers or homeowners, it's a great way to finance energy-efficient upgrades without (in theory) paying anything out of pocket. In this article I cover EEM basics and explain how HERS raters and home performance contractors fit into the picture.
The FHA is the department of the U.S. government that insures mortgages (contrary to popular belief, it doesn’t lend money). It guarantees the lender that if the homeowner defaults on the mortgage, the federal government will step in and make good the default. It does this by reviewing the loan package before the close of escrow to make sure that the package conforms to FHA guidelines.
You might think that FHA guidelines would be remarkably strict, but that’s not the case. Overall, the qualifying requirements are quite reasonable compared to those of other loan programs. You can get a FHA-insured mortgage with a down payment of as little as 3%. You can ...
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