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Energy Efficient Mortgage Homeowner Guide

THE ENERGY EFFICIENT MORTGAGE means comfort and savings. Whether you are buying, selling, refinancing, or remodeling your home, you can increase your comfort and actually save money by using the Energy Efficient Mortgage (EEM).  It is easy to use, federally recognized, and can be applied to most home mortgages. EEMs provide the borrower with special benefits when purchasing a home that is energy efficient, or can be made efficient through the installation of energy-saving improvements.

Homeowners with lower utility bills have more money in their pocket each month. They can afford to allocate a larger portion of their income to housing expenses. If you have more cash, why not buy a better, more comfortable home?  There are two options with the Energy Efficient Mortgage.

Finance Energy-Saving Improvements!

  • Cost-effective energy-saving measures may be financed as part of the mortgage!
  • Make an older, less efficient home more comfortable and affordable!



  • Qualify for a larger loan on a better home!
  • Get a more comfortable home NOW.
  • Save money every month from Day One.
  • Increase the potential resale value of your home.


  • Sell your home more quickly.
  • Make your house affordable to more people.
  • Attract attention in a competitive market.


  • Get all the EEM benefits without moving.
  • Make improvements which will actually save you money.
  • Increase the potential resale value of your home.

Pay for energy improvements easily, through your mortgage. Your lender can increase your loan to cover energy improvement costs. Monthly mortgage payments increase slightly, but you can actually save money because your energy bills will be lower!

Home Energy Assessment

The Borrower will need to obtain a home energy assessment. The energy assessment will provide:

  • Recommendations of energy-saving improvements for the Borrower’s consideration,
  • Estimate of the money each improvement will save in energy costs, and
  • Estimate of the cost to make each improvement.

The Mortgage Lender must use information from the home energy assessment report to determine the amount of money homeowners will save in energy costs with each improvement.   Improvements are “cost-effective” when they save the homeowner as much or more than the cost of improvements

Qualified Energy Assessors

Qualified home energy raters/assessors must be trained and certified as one of the following:

  • Building Performance Institute Building Analyst Professional
  • Building Performance Institute Home Energy Professional Energy Auditor
  • Residential Energy Services Network Home Energy Rater

The home energy report must reflect one of the above professional credentials by the assessor.


Energy-efficient homes cost less to own than non-efficient homes, though they may start off with higher price tags.

Replace example above with below chart.  Please adjust font for consistency with rest of page.



Older Existing Home

Same Home with $10,000 Energy Improvements

Home Price



Mortgage Amount (96% of Price)



Monthly Payment  ** (30-year mortgage at 5.5%, rounded)



Monthly Energy Bills (Electric, Gas)



Monthly Cost of Homeownership



Monthly Savings



Home Comfort During Hot or Cold Weather

- - -


*Values shown are for comparison only, and will vary from home to home.

**Monthlypayments are for principle and interest only, and do not include taxes, hazard insurance, homeowners association fees, etc. 

Lenders recognize the savings that energy upgrades will bring to homeowners. Borrowers may use these potential savings like extra cash, and add the cost of upgrades into the mortgage, paying them off as part of the monthly mortgage payment.

FHA's Energy Efficient Mortgage Program

The FHA Energy Efficient Mortgage covers upgrades for new and existing homes and is now available in all 50 states. Key features include:

  • Loan limits may be exceeded
  • No re-qualifying
  • No additional down payment
  • Improvements are made after closing-   Appraised value is based on home prior to upgrades (appraisal does not need to reflect value with improvements)


Customer Quote: "The EEM was the second best thing that ever happened to me. The first best was actually being able to buy a home. This is our first home, and the EEM saved us a lot of headaches because we knew what we needed to do to the house. It's nice and comfortable now. Even my dogs are happy. I am very impressed." -Pat Theard

First-time home buyers Patricia and Mynette Theard purchased their home in California. It was built in 1940, and sold for $150,000. They got an FHA loan for 95% of the value of the property. The lender saw an opportunity for them to improve on their investment and recommended an Energy Efficient Mortgage.

A  home energy assessment on the home recommended $2,300 in energy improvements including ceiling, floor and furnace duct insulation, plus a setback thermostat. The lender set aside an extra $2,300 for the improvements, bringing the total loan amount from $142,500 to $144,800. The loan closed, the Theards moved in, and the improvements were installed. The monthly mortgage payments increased by $17, but the Theards are saving $45 each month through lower utility bills.

Ask your lender about an Energy Efficient Mortgage. If they are not knowledgeable about the EEM, encourage them to learn about it, or find another lender.


Adding Energy Improvements through a Home Refinance

"It's wonderful. We're just amazed at the difference. We've hardly used the furnace all winter. The house is much quieter too. It makes sense for everyone to do it." -Caroline Chang

In the fall of 1995, Caroline and Tommy Chang decided to refinance their 35-year-old home to take advantage of lower interest rates. Their lender suggested they get an energy assessment  on the home so they could finance energy improvements through their new mortgage deal as well.

The lender increased the loan by $8,760 to cover the cost of energy improvements. Their final loan amount was $176,400, which is higher than they could have gotten without the EEM. The loan closed and the improvements were installed. These included double-paned windows, wall insulation, ceiling insulation, furnace duct repairs and insulation, and a few smaller items. These improvements, combined with their lower mortgage interest rate, mean the Changs will be saving about $230 per month. They will be more comfortable too!


It is best to have the home energy assessment done as early in the loan process as possible. This way, the assessment can be conducted while the lender is processing your loan.  Closing the loan should not be delayed. You may get a larger tax deduction with the EEM because the interest on mortgage payments is tax deductible. This can save you more money than paying for energy upgrades with a credit card, bank loan, or cash, none of which are usually tax deductible.

Each house is as unique as its owner. Benefits derived from the EEM will vary from one house to another, and the benefits in the examples in this book may not apply in all cases. Your lender will be your best source of information on your own EEM benefits.


All buyers who qualify for a home loan qualify for the EEM.  Both existing and newly constructed properties are eligible.

A house could be your biggest investment ever. Use the Energy Efficient Mortgage and invest wisely.