FHA Energy Efficient Mortgages

FHA’s energy efficient mortgage program provides mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.

What are the eligibility requirements?

• • Borrowers are eligible for approximately 97% financing. Borrowers are able to finance closing costs and the up front mortgage insurance premium into the mortgage. Borrowers are also responsible for paying an annual premium.

  • Eligible properties are one to two existing units and new construction.

  • The cost of the energy efficient improvements that may be eligible for financing into the mortgage is the greater of 5% percent of the property's value (not to exceed $8,000) or $4,000.

  • To be eligible for inclusion in the mortgage, the energy efficient improvements must be cost effective, meaning that the total cost of the improvements is less than the total present value of the energy saved over the useful life of the energy improvement.

  • The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating system (HERS) or energy consultant. Up to $200 of the cost of the energy inspection report may be included in the mortgage.