Energy Efficient VA Home Loans

27 Mar Energy Efficient VA Home Loans

Energy Efficient VA Loans: Going Green and Saving

Many military members and veterans who want to go green in their homes turn to VA Energy Efficient Mortgages. Doing so is  good for the environment, but the real motivation for many to seek out veteran solar panel programs and other energy-saving options is because of the savings that can be realized on utility bills over the lifetime of the loan thanks to such upgrades.

The VA Energy Efficient Mortgage (EEM) program can help  upgrade  your home to be more  energy efficient   and roll the costs of doing so into the VA Home Loan.

What is an Energy Efficient Mortgage (EEM)?

An EEM is an add-on to the FHA loan  you use to buy or refinance a home. The VA Lender’s Handbook, VA Pamphlet 26-7, describes the VA Energy Efficient Mortgage as a program designed to allow the lender to include additional loan funds “…to cover the cost of making energy efficiency improvements to a dwelling”. 

The dwelling is a home you own and want to refinance with a VA mortgage or a home you are about to purchase with a VA mortgage.

A VA EEM loan can be approved as add-ons to both purchase loans and refinance loan options including the VA Streamline Refinance loan. The projects funded with the EEM loan must be approved by the lender and you cannot use EEM loan proceeds in an unrestricted way.  

The maximum amount of an EEM loan is determined in one of three ways. A VA Energy-Efficient Mortgage is an add-on to your mortgage or refi so the amounts below reflect the amount of the EEM funds only. Your total VA loan amount will depend on several variables including the amount of any down payment, whether you finance the VA loan funding fee, etc.

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Borrowers may qualify for one of the following EEM options and amounts:

• Up to $3,000 (the amount determined “solely on the documented costs” according to the VA official site.
• Up to $6,000 (as long as the increase in the borrower’s mortgage payment does not “exceed the likely reduction in monthly utility costs”.

The Department of Veterans Affairs does not approve EEMs for above $6,000.

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 can 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 $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 $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 create 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 to 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?

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 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
• Furnaces
• Vapor barriers

If you are exploring your Energy Efficient Mortgage options, you may wish to get the help of a qualified home energy auditor who can help identify the specific needs you may need to address in your home to make it more energy efficient. You may be able to get help from your local utility company to do this. Whether or not you choose to employ an expert in this way is up to you.

If you  are looking into an EEM and want to find options to “go green for veterans”  search for a participating VA lender who offers Energy Efficient Mortgages or discuss your needs with your current participating lender. Remember that VA EEMs are available for refinance loans, too.

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
• Furnaces
• 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:

• Appliances
• 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 Anonymous network.