A Lending Hand for the Energy-Efficient Home Buyer

Last year, my wife and I went through the delightful process of buying a home (I also had to sell a home, but that’s a post for another time). While we can look back and laugh about it now, there were many times when we thought the deal would fall apart.

The home which we now own is an older home, built in the 1920s. We knew going into it there likely would be issues – just a given for a home nearly 100 years old.

We did our due diligence and consulted a home inspector. His report came back with a slew of issues we expected – adventures in electric wiring, improper grading, cracks in the pavement – the usual.

But there were a few things from the report that did give us pause, particularly those that focused on the home’s energy efficiency. While most of the windows were new, there were other capital-intensive upgrades that needed attention, including a new furnace, re-worked air ducts and updated insulation, among other items.

Living in Minnesota, I can deal with a cracked driveway. But living without a furnace? That’s just not an option.

As we considered all of the updates needed to make our home as efficient as possible, our heads began to spin. Ultimately, we realized we would need to make a sacrifice, but it was frustrating to have to make such significant short-term sacrifices when our end goal was saving long-term energy – and dollars.

If only there was a way to purchase and install the energy-efficient equipment in our new home while still staying within our original budget.

Well, it turns out for many Americans, there is a way to do just that.

A number of programs are available that can help homeowners make energy-saving improvements to their homes. The FHA Energy Efficient Loan program helps current or potential homeowners significantly lower their monthly utility bills by enabling them to add the cost of making energy efficiency improvements into their mortgage. The program is designed to eliminate the need for homeowners to take out an additional mortgage loan to cover the cost of the improvements they intend to make to their property.

How the Program Works

Similar to a more traditional “home renovation” loan, a home’s energy savings are calculated using the Home Energy Rating System (HERS) index, which calculates what the average energy usage would be in the home once the improvements are made compared to a similar home that did not have the work done.

It’s a great option for qualified home buyers/owners looking to make a dent in their annual energy usage. And it’s a great option for people like me that love the character of older homes. Even newer homes can benefit from a program like this.

What do you think? Is this a good idea or yet another hurdle in the dizzying home-buying process?

Article by Tim Laughlin, appearing courtesy Xcel Energy Blog.

Have any Question or Comment?

4 comments on “A Lending Hand for the Energy-Efficient Home Buyer

Kerry langley

Tim, I glad to hear that you found an energy efficient mortgage product to purchase and retrofit your home. It is amazing that more folks(and frankly more lenders) don’t take advantage of these great loan products. I have focusd the last tyree users of my career to developing innovative strategies to promote the widespread use of EEM’s and as a matter of fact have just started a partnership with the national lender “Real Estate Mortgage Network” to build a national lending team focused on funding energy retrofits. Good for you!!


Congratulations on your energy efficient home! I love success stories! I would love to learn more about the specifics of your project like what improvements you had done. Hopefully, you were able to include ground source heat pump or solar and optimized the 30% tax credit til 2016 and also optimized every penny of rebate and refund at every level. Trane and Carrier offer huge rebates on geothermal heat pumps. The utility companies offer rebates for connecting to existing ductwork. Towns offer tax credits, too. Buyers should get EVERY PENNY when doing the FHA EEM. Roll it into a 203(k) if other improvements are needed, too, like roofing, flooring, even appliances. Very few lenders can arrange this type of unique and sensible home financing. My team and I are one of them. Great post and best wishes, Tim!

The National Energy Retrofit Institute – NERI – has an entire curriculum built around Energy Mortgages offered by University of Central Missouri (UCM). There are many key players involved in the NERI consortium, all of which play important roles as Energy Mortgages gain steam across the USA.

Here are a couple: NERI: http://www.ucmo.edu/neri/

I hope that this information proves helpful for those of you considering either utilizing an EEM or getting involved in the energy improvement/retrofit marketplace. Thank you.

For more information regarding Energy Mortgages and how they work, here are a couple websites that might help clarify things for you:

http://www.motherearthnews.com/ask-our-experts/energy-efficient-improvement-mortgage.aspx and http://203kkc.com/fha-energy-efficient-mortgages/

If you would like more information, use Google to search for “energy mortgages” and you will get a lengthy listing of websites, some helpful and some not so much.

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