Did You Know?

FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

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Make Your Home Energy-Efficient with the FHA EEM

Make Your Home Energy-Efficient with the FHA EEM
The renewable energy industry is growing more and more every year, and many homeowners have implemented energy-efficient strategies in their homes. This can include programmable thermostats, solar panels, new insulation in the attic, etc. These improvements not only save energy and lower energy costs, but also improve your quality of living at home. 

However, it is not always affordable for everyday Americans to implement such energy-saving technology in their homes. To pay for such upgrades, many homebuyers and owners look into opening new credit cards or even getting Home Equity Loans.  

What many people do not realize is that there is another option available through the FHA, which is the Energy Efficient Mortgage (EEM). With this mortgage program, the borrower is credited for having energy-efficient updates in the home with the mortgage itself. The EEM allows borrowers to finance energy-saving measures in their home along with the purchase or refinance. By stretching the debt-to-income ratio and allowing potential borrowers to qualify for a bigger loan, the FHA lets them buy a more energy-efficient home. 

The EEM is also cost-efficient, since less energy usage means smaller utility bills! The money that borrowers save on their bills can then be used toward paying off the larger loan. 

 How Does the EEM Work? 

The FHA offers Energy Efficient Mortgages in which it insures a loan that is used to purchase/refinance a home as well as the cost of energy efficient improvements. This is called the "energy package.”  

Before you can be approved for the additional funds for the upgrades, you will need to have a home energy assessment done. This will provide recommendations of energy-saving improvements, estimates of how much each upgrade will cost, and an estimate of how much money they will SAVE the borrower.  According to HUD regulations, the person must be trained and certified as a (1) Building Performance Institute Building Analyst Professional, a (2) Building Performance Institute Home Energy Professional Energy Auditor, or (3) a Residential Energy Services Network Home Energy Rater. 

The FHA’s lending limits do not upset the process of obtaining an EEM, but there is a way to determine how much can be financed. The maximum amount of the portion of the EEM for energy efficient improvements is the lesser of 5% of: 
  • the value of the property, or  
  • 115% of the median area price of a single-family dwelling, or  
  • 150% of the conforming Freddie Mac limit. 
Once you have been approved for an FHA Energy Efficient Mortgage, the process goes on like any other FHA loan. Funds from the EEM loan can be used to pay for materials, labor, inspections, and the home energy assessment. FHA EEMs are available for site built as well as for manufactured homes.
If you are interested in making energy-saving upgrades to your home, the FHA Energy Efficient Mortgage might be a great option for you. HUD has a list of approved lenders able to provide EEM programs, in addition to a fact sheet about FHA's EEM.


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FHA Loan Articles

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There are plenty of reasons to delay plans to refinance a home. One reason has made big headlines. When borrowers face higher interest rates than originally approved for, that is a good reason to wait to refinance.

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When you are approved for an FHA One-Time Close Construction loan, you get a single loan that pays for both the costs to build the house, and serves as the mortgage. One application, one approval process, and one closing date.

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In the last days of November 2023, mortgage loan rates flirted with the 8% range but have since backed away, showing small but continued improvement. What does this mean for house hunters considering their options to become homeowners soon?

Is It Cheaper to Buy a Home With an FHA Loan or to Rent?

In May 2023, USA Today published some facts and figures about the state of the housing market in America. If you are weighing your options for an FHA mortgage and trying to decide if it’s cheaper to buy or rent, your zip code may have a lot to do with the answers you get.

Why Do FHA Loans Have Borrowing Limits?

FHA loan limits serve as a crucial mechanism to balance financial sustainability, regional variations in housing costs, and the agency's mission to promote homeownership, particularly for those with limited financial resources.

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