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An Energy Efficiency Mortgage from HUD Can Help Enhance Your Home!

We would all like to make our homes more energy efficient, but paying for these improvements can be costly.

Installing a solar water heater, for example, costs an average price of $3,376 according to HomeAdvisor; if you have a high-end installation, the price can be up to $11,000! Heat pumps, which transfers heat through the home for greater efficiency, cost an average of $5,476, while the high end goes as high as $9,900.

These are just a couple examples that demonstrate that significant upfront costs that come from enhancing the overall efficiency of your home. If you start combining projects, you can easily reach into hundreds of thousands of dollars.

This price tag will often keep people from performing important changes that decrease energy use through the home. Energy Efficient Mortgages, or “EEMs,” however, can help you sustain the initial costs of these projects, allowing you to enjoy the long-term rewards that come from reducing energy use.

Energy Efficiency Mortgages for Your Home

Energy Efficiency Mortgages are available for your home through the Department of Housing and Urban Development. With these loans, you can make a wide range of improvements to your home. Basically, most renovations or improvements that reduce your energy bill will qualify for the loans. This includes solar water heaters, weather stripping, improvements for furnaces, water-heater insulation, heat pumps, and the installation of vapor barriers. Essentially anything that reduces your energy use will qualify.

And these changes can mean significant savings over the lifetime of a home. According to, installing double-hung windows can save as much as $83 per year. Installing storm windows can save you up tp $274 a year, while replacing an older toilet with a water-efficient model can bring up to $100 per year. These numbers might not sound like much, but the savings can start to pile up quickly, making these projects an important part for improving the cost of living in your home.

This program is beneficial to both buyers and sellers. Buyers benefit because they can qualify for larger loans on a better home than might otherwise be available on their budget. They also get a more comfortable home quickly, as opposed to waiting for repairs and improvements that would help regulate the temperatures in the house. When they buy a house that is improved, or make improvements themselves, they will also experience a reduced cost for their utility bills, and will see increased potential for their resale.

Sellers will also benefit. They will be able to sell their home more quickly, as an energy-efficient house is more attractive to most buyers. Because the utility bills have been reduced, there is also an increased potential for buyers because the home will be less expensive to own and operate. If you live in a highly competitive buyer’s market, it could also attract the attention of more buyers, further increasing the benefit of Energy Efficiency Mortgages.

To be eligible for the loan, you will need to have a professional, known as a home energy evaluator, conduct an assessment and give your house a home energy rating. It will cost you about $400 to complete this service. With this rating, you will have an estimate of the monthly energy savings that will come from the improvements.

Changes like spray insulation could be paid for with an Energy Efficiency Loan

This energy assessment will help you determine how energy efficient your home really is, and will provide recommendations for energy-saving improvements. It will not only give ideas for you to consider, it will also provide estimates of the money each improvement will save in energy, as well as the estimated cost to complete each project. The mortgage lender will then use information from the home energy assessment to decide on the amount of money you need for your Energy Efficiency Mortgage.

The home energy assessments are completed by trained professionals who understand how to analyze a home and predict the home’s ability to use less energy. To qualify for the program, the assessor used must be trained and certified as a Building Performance Institute Building Analyst Professional, a Building Performance Institute Home Energy Professional Energy Auditor, or a Residential Energy Services Network Home Energy Rater. With this training, they will be qualified to make a decision on the current quality and condition of your home.

For an FHA-backed Energy Efficiency Mortgage, you will be able to add the costs of approved energy improvements to your total FHA loan amount. This can be done without going above the maximum FHA loan limits. The maximum amount of the portion of your energy loan is the lesser of five percent of either the value of your property, the FHA loan limit in your area, or 150% of the conforming limit.

Energy Efficiency Mortgages Also Available Through the VA

You can also work through the Department of Veterans Affairs to increase your overall energy efficiency. With the VA’s program, you will typically get six months after the closing to complete any improvements that will reduce your energy bill, including improvements across various categories such as new appliances or new windows.

With a VA-supported Energy Efficiency Loan, you will be able to borrow about $6,000 for qualified improvements. You can use this money for energy-efficient windows, new doors, solar heating, and insulation, among many other home-improvement options. You will need to go through many of the same steps, including an energy audit.

After you have the energy audit, your lender will know the expected cost of these improvements. The funds for the improvements will be held in escrow and will be released after the upgrades have been finished and inspected by a qualified professional.

Proudly Helping with Your Energy Efficiency Efforts!

San Diego Purchase Loans would love to help you find the right loan for your needs. Contact our helpful staff today and we’ll make sure you are fully informed on your Energy Efficiency Loan options. From helping you locate an assessor to securing the best possible terms, we’ll do everything we can to make your home better than ever!


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Chad Baker, CrossCountry Mortgage   
NMLS# 329451 | CCM NMLS# 3029