ENERGY EFFICENT MORTGAGES PART #3

FHA Energy Efficient Mortgages

In the last few years, FHA loans have become the loan of choice for people putting down around 5%. The FHA allows lenders to add up to 100% of energy efficiency improvements to an existing mortgage loan with certain restrictions. FHA mortgage limits vary by county, state and the number of units in a dwelling. See www.fha.com/lending_limits.cfm for more details. These mortgages were previously limited to $8,000. In June 2009, HUD issued Mortgagee Letter 2009-18 which announced the removal of the dollar cap. The maximum amount of the portion of an energy efficient mortgage allowed for energy improvements is now the lesser of 5% of:

• The value of the property,
• 115% of the median area price of a single-family dwelling, or
• 150% of the Freddie Mac conforming loan limit

Loan amounts may not exceed the projected savings of the energy efficiency improvements. FHA loan limits do not apply to the EEM. Presently, up to $200 of the cost of the HER may be included in the mortgage, and borrowers may include closing costs and the up-front mortgage insurance premium in the total cost of the loan. The loan is available to anyone who meets the income requirements for FHA’s Section 203 (b), provided the applicant can meet the monthly mortgage payments. New and existing owner-occupied homes of up to two units qualify for this loan.