From the Editors of E/The Environmental Magazine
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Low-Cost Mortgages for Green Homes
What are energy-efficient mortgages and how do I qualify for one?
A movement is afoot among real estate lenders to offer special mortgages and other incentives designed to reward energy efficiency and green-friendly building and restoration. Borrowers planning to purchase new energy efficient homes, as well as those looking to do ecologically motivated renovations on older homes, can take advantage of such programs to increase their mortgage amounts while offsetting construction costs.
Fannie Mae, the Congressionally chartered company that works with lenders to back mortgages for low and moderate income Americans, is the prime mover of green mortgages through its Energy Efficient Mortgage program. To qualify for the program, homeowners must either buy a new energy-efficient home or commit to upgrades of an existing home as recommended by an inspector certified through the Home Energy Rating System.
Such inspections can run as much as $400, but the projected savings from energy efficiency are considered part of the borrower’s income and can help homebuyers qualify for larger mortgages. By increasing borrowing power, the Energy Efficient Mortgage allows homeowners to fold the costs of energy efficiency into the total mortgage amount. Factors such as window efficiency, heating- and cooling-system efficiency, wall-to-window ratios, insulation levels and local climate — even the solar orientation of the home — determine a home’s rating.
A borrower opting for new construction can qualify for an Energy Efficient Mortgage if the home is to be built according to guidelines set by the Energy Star Builder Option Program, a project of the Environmental Protection Agency to encourage energy efficient building and design. Once construction on the new home is complete, a Home Energy Rating inspection is conducted to determine the home’s energy efficiency, which will in turn dictate the specific terms of the mortgage.
Eligible borrowers can obtain an Energy Efficient Mortgage backed by Fannie Mae with as little as a three percent down payment. Detailed requirements for qualification are posted on the Fannie Mae website, which also lists participating lending institutions from coast to coast.
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