Energy Efficient VA Loans: Going Green and Saving
Many people are becoming more interested in “going green” with their home. Both because it’s good for the environment and because you can save some serious money doing so. With the VA Energy Efficient Mortgage (EEM) program as well as the Energy Improvement Mortgage (EIM), many veterans and service members are able to upgrade their homes to an energy efficient status and put the costs of doing so into their VA Home Loan.
What is this Energy Efficient Mortgage (EEM)?
An EEM is a loan used to buy new homes that are energy efficient. You have a time period of six months after you purchase your home to make the improvements necessary to qualify. After six months, the VA EEM will perform an energy audit at your house. Here are some important points with the Energy Efficient Mortgage:
- The financing you receive for making the energy efficient improvements is kept in an escrow account until all the work is finished
- With a contractor’s written bid, it is possible to add an additional $3,000 to the maximum (100%) financing limit to your VA Home Loan
- By supplying the VA with a completed energy analysis detailing where the savings to your utility expenses will exceed their current expenses, you can add an additional $3,001 to $6,000 to your VA Home Loan
- If you get an appraisal that lists that the improvements made to your home as a result of your EEM creat a dollar for dollar increase in the value of your home, you can add any amount over $6,000 to your VA Home Loan
What are the facts about an Energy Improvement Mortgage (EIM)?
If you are refinancing your home, you may qualify for an Energy Improvement Mortgage (EIM). This loan is used to provide upgrades to your existing home and will be added onto your refinanced loan. If you would like to include an EIM with an IRRRL Streamline VA Loan, you will have to ensure your application is completely underwritten if the amount of the EIM loan will cause your mortgage payments to rise by 20 percent or more.
What improvements are eligible through these programs?
Here is a partial list of areas in your home you may upgrade with an energy efficient VA Loan:
- Water Heater
- Ceiling, attic and floor insulation (new or additional)
- Caulking and weather stripping
- Insulated garage doors on an attached garage
- Clock thermostats
- Insulation for water heater
- Windows and doors
- Heat pumps
- Permanent air conditioning units
- Solar heating and cooling systems
- Vapor barriers
Are there any improvements that are ineligible through these programs?
For the sake of energy efficient improvements to your home, any upgrade that is not considered permanent is not eligible to be included with an EIM or an EEM. This includes upgrades to things like:
- Window air conditioner units
Additionally, the following types of upgrades do not qualify:
- New roofing
- Vinyl siding
- Glass block windows
Your home will improve with EEM or EIM upgrades
If you’ve ever looked around for solar panels or other types of energy efficient upgrades to your home, you know they usually require a lot of money upfront and their financial benefits can take years to kick in.
That’s the great thing about getting an energy improvement or energy efficient mortgage. You can finance your costs and start saving almost immediately. Additionally, you can live in a more energy efficient home and possibly increase the value of that home at the same time.
If you want to look into an EEM or EIM today, contact one of the many lenders in the Veterans Authority network.