Green Mortgage Lending
Green mortgage lending is also called “energy-efficient mortgages (EEM),” and is one of the latest advances in the mortgage industry.
What is a “Green Mortgage?”
The thrust of these unique loans is to improve and reward the use of more energy-efficient products within the home. In many cases, these types of mortgages allow buyers to qualify for bigger credit advances. The rationale is that the homeowner can manage higher monthly mortgage payments due to the fact that they will be saving money on heat, water, and other utilities.
Who is eligible for a Green Mortgage?
Most of the green mortgages are easiest to secure by large-scale housing developments that are integrating “green building” construction where engineers have already authenticated energy savings. Green mortgages are slightly harder to obtain for privately owned, energy-efficient, single-family homes since the savings are slightly more challenging to estimate – but can still be done on a case-by-case basis. Still, some banks are offering, at the very minimum, discounted closing costs for buyers of homes that meet the Energy Star energy efficiency requirements.
What Qualifies a Home for Green Mortgage Lending?
Environmental, friendly building products such as recycled glass tile, bamboo flooring, and various other lavish upgrades are not enough to qualify for green mortgage lending. Rather, such elements as Energy Star appliances, programmable thermostats, fluorescent light bulbs, geothermal heat pumps, and water submeter systems are the types of items that will help secure green mortgage lending. Ultimately, homes require a home energy rating to provide the lender with the estimated monthly energy savings and the value of the energy efficiency measures – known as the Energy Savings Value.
What’s the Difference Between a Green Mortgage (EEM) and an Energy Improvement Mortgage (EIM)?
Energy Improvement Mortgages (EIM) are used to purchase existing home that will have energy efficient improvement made to them. The EIM loan allows borrowers to include the cost of energy-efficient improvements to an existing home in the mortgage without increasing the overall down payment.
Who Provides Green Mortgage Lending?
Green mortgage lending as well as EIMs are sponsored by federally insured mortgage programs (FHA and VA) as well as the conventional secondary mortgage market (Fannie Mae and Freddie Mac).
Conventional Green Mortgage Lending
Conventional green mortgage lending can be offered by lenders who sell their loans to Fannie Mae or Freddie Mac. These loans increase the purchasing power of a buyer by allowing the lender to increase the buyer’s income by a dollar amount equal to the estimated energy savings.
FHA Green Mortgage Lending
The mortgage loan amount can be increased by the cost of the energy improvements. The maximum amount allowed is, however, calculated using a formula that is somewhat complicated and can best be reviewed by a green mortgage consultant.
VA Green Mortgage Lending
This loan is available to qualified military personnel, reservists, and veterans for energy improvements when purchasing an existing home. However, the VA caps energy improvements between $3,000-$6,000.
Why Should You Consider Green Mortgage Lending?
Green mortgage lending not only promotes prudent environmental consciousness, it also offers significant potential homeowner savings that can absolutely translate into increased buying power.