Energy Efficient Mortgage Program (EEM)
FHA’s Energy Efficient Mortgage program (EEM) helps homeowners save money on utility bills by enabling them to finance the cost of adding energy features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage.
EEMs recognize that reduced utility expenses can permit a homeowner to apply a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage.  FHA EEMs provides mortgages to borrowers for purchase or refinance a principal residence and incorporate the cost of energy for the additional money.  EEM is one of many FHA programs that insure mortgage loans and encourage lenders to make mortgage credit available to borrowers who would not qualify for conventional loans.
All persons who meet the income requirements for FHA’s standard Section 203 b insurance and can make the monthly mortgage payments are eligible to apply.  The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating system (HERS) or an energy consultant.  The cost of an energy inspection report and related fees may be included in the mortgage.  Cooperative units are not available.
EEM can also be used with FHA’s Section 203(h) program for mortgages made to victims of presidentially declared disasters. The mortgage must comply with both Section 203(h) requirements, as well as those for EEM. However, the program is limited to one unit detached houses.
EEM can be used to make energy efficient improvements in one to four existing and new homes. The borrower is eligible for a maximum FHA insured loan, using standard underwriting procedures.  The borrower must make a 3.5 percent downpayment.  This 3.5 percent downpayment is based on the sales price or appraised value. 
The cost of the energy efficient improvements that may be eligible for financing into the mortgage is the lesser of the dollar amount of cost-effective energy improvements plus cost of report and inspections or the lesser of 5% of the value of the property, 115% of the median area price of a single family dwelling or 150% of the conforming Freddie Mac limit.  To be eligible for inclusion in the mortgage, the energy efficient improvements must be cost effective.
 The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating report that is prepared by an energy consultant using a Home Energy Rating System (HERS). The energy improvements are installed after the loan closes. The maximum mortgage limit for a single family unit depends on its location, and it is adjusted annually.

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