You can benefit from energy-efficient financing whether you're buying, selling, refinancing, or remodeling a home. If you're shopping for an energy-efficient home, an energy-efficient mortgage (EEM) can help you qualify for a more expensive home. The EEM considers lower energy costs to allow borrowers to afford a slightly larger mortgage payment.
Energy-Efficient Financing Programs
Before looking for efficiency financing, first determine if you qualify for the U.S. Department of Energy's (DOE) Weatherization Assistance Program or another program that will cover the cost of improvements.
If energy efficiency options are right for you, you can apply for energy-efficient financing through a government-insured or conventional loan program. Some states have programs specifically for their residents -- contact your state energy office for information.
If you are interested in financing energy improvements with a home purchase or refinance, contact your lender to ask if they offer Fannie Mae's HomeStyle Energy Mortgage, Freddie Mac's GreenCHOICE Mortgage, or other similar financing options. If you believe a home you are interested to purchase is already energy efficient, as for a green appraiser to inspector to account for reduced energy bills as part of the home's total costs. By financing the cost of energy efficient technologies as part of a home mortgage, many borrowers can benefit from lower interest rates as compared to other types of financing options.
Home Energy Rating
A home energy rating will help you qualify for an EEM by detailing for you and the lender the energy-efficiency of a home. A rating typically involves an energy assessment by a certified professional energy rater. Your home will be rated on a scale of 0 to 150, with a lower score indicating a more energy-efficient home. Many energy financing services require a positive home energy report such a a Home Energy Rating System (HERS) or a DOE Home Energy Score to qualify. Most often, HERS ratings are used for newly constructed homes, and Home Energy Scores are used for older homes.
An energy rater will inspect the energy-related features of your home, such as insulation levels, window efficiency, heating and cooling systems, and air leakage. After the inspection, the energy rater will provide a report that includes the home's energy rating and an estimate of annual energy use and costs. The report also may recommend energy upgrades, estimate their costs, and calculate the potential annual savings and payback (the time it takes the improvements’ savings to equal their cost).
To help qualify for most energy-efficient financing, the report must show that the home is energy-efficient - or will be after the recommended upgrades -and that the improvements are cost-effective.