Source: http://www.disasterhousing.gov/offices/hsg/sfh/eem/energy-r.cfm

FHA's Energy Efficient Mortgage program (EEM) helps homebuyers orhomeowners save money on utility bills by enabling them to finance the cost ofadding energy efficiency features to new or existing housing as part of theirFHA insured home purchase or refinancing mortgage.

Purpose

In 1992, Congress mandated a pilot demonstration of Energy EfficientMortgages (EEMs) in five states. In 1995, the pilot was expanded as a nationalprogram.

EEMs recognize that reduced utility expenses can permit a homeowner topay a higher mortgage to cover the cost of the energy improvements on top ofthe approved mortgage. FHA EEMs provide mortgage insurance for a person to purchaseor refinance a principal residence and incorporate the cost of energy efficientimprovements into the mortgage. The borrower does not have to qualify for theadditional money and does not make a downpayment on it. The mortgage loan isfunded by a lending institution, such as a mortgage company, bank, or savingsand loan association, and the mortgage is insured by HUD. FHA insures loans.FHA does not provide loans.

Type of Mortgage:

EEM is one of many FHA programs that insure mortgage loans--and thusencourage lenders to make mortgage credit available to borrowers who would nototherwise qualify for conventional loans on affordable terms (such as firsttime homebuyers) and to residents of disadvantaged neighborhoods (wheremortgages may be hard to get). Borrowers who obtain FHA's popular Section203(b) Mortgage Insurance for one to four family homes are eligible forapproximately 96.5 percent financing, and are able to fold closing costs andthe upfront mortgage insurance premium into the mortgage. The borrower mustalso pay an annual premium.

EEM can also be used with the FHA Section 203(k) rehabilitation program and generally follows that program's financing guidelines. Forenergy efficient housing rehabilitation activities that do not also requirebuying or refinancing the property, borrowers may also consider HUD's Title IHome Improvement Loan program.

How to Get a EEM:

To apply for an FHA insured energy efficient mortgage, contact an FHA approved lender.

Eligible Customers:

All persons who meet the income requirements for FHA's standard Section203(b) insurance and can make the monthly mortgage payments are eligible toapply. The cost of the energy improvements and estimate of the energy savingsmust be determined by a home energy rating system (HERS) or an energyconsultant. The cost of an energy inspection report and related fees may beincluded in the mortgage. Cooperative units are not eligible.

EEM can also be used with FHA's Section 203(h) program for mortgagesmade to victims of presidentially declared disasters. The mortgage must complywith both Section 203(h) requirements, as well as those for EEM. However, theprogram is limited to one unit detached houses.

Eligible Activities:

EEM can be used to make energy efficient improvements in one to fourexisting and new homes. The improvements can be included in a borrower'smortgage only if their total cost is less than the total dollar value of theenergy that will be saved during their useful life. Other eligibilityrequirements may be found in the Homeowner's Guide.

Eligibility Requirements