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Quick Fact Sheet on Energy Efficient Mortgages
Executive Summary:
An Energy Efficient Mortgage (EEM) is a conventional fixed rate mortgage designed to help people afford a better and more energy efficient home than people may otherwise be able to afford. The actual energy improvement costs may be included in the loan amount up to 15% of the property’s value. While this loan type has been around since 1999 through Fannie Mae, it has only recently become more popular with Global Warming increasing in the public's mind.
- Property Type: Single Family Residence or Condo / PUD Only
- Loan Purpose: Purchase and Refinance
- Loan to Value: Modified to include the cost of Energy Efficient Upgrades. The LTV is still limited by the loan program.
- Mortgage Insurance: Required
- Down payment: None required by the borrower however a minimum of 3% must be contributed toward the EEM mortgage transaction.
- Source of funds:
- Borrower funds on deposit
- Gifts, grants, loans from relatives, or secured borrowings
- Community Second Mortgages
- Energy Efficient Rebates from government agencies, utilities, and manufacturers
- Second Mortgages: Community Seconds are the only allow type of 2nd mortgage.
- Debt To Income: Maximum of 41%
- Income Reporting Includes:
- Typical allowed income of the borrower(s) (salary, commission, bonus, etc)
- Computed energy savings due to energy efficient upgrades
- Energy Efficient Tax Credits
- Sales Price (Resales with Energy Efficient Improvements): Equals the sale price of the home PLUS the Energy Savings Value obtained from the Energy Report (limit of 15% of sale price).
- Appraised Value (Resales with Energy Efficient Improvements): Equals the appraised value PLUS the Energy Savings Value obtained from the Energy Report (limit 15% of appraised price)
- Escrow for Energy Efficient Improvements: For Energy Efficient Improvements to be completed after the sale, an escrow account is setup at closing. It:
- Contains sufficient funds to complete the improvements
- Funds released only after documentation of completion of the improvements
- Extra funds must be applied to the balance of the mortgage
- Reserves: 1 Month PITI
- Ratios for existing energy efficient homes are higher than standard ratios
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