The FHA 203k Renovation Loan Is The Real “Green Home Loan” As Energy-Efficient Improvments And Non-Toxic Building Materials Can Be Combined To Into One Renovation Transaction

7 06 2011
  • A “Green Home” conserves energy and uses of non-toxic building materials
  • The conservation of energy saves on heating and cooling costs
  • The of non-toxic materials is very important for health and environmental reasons
  • Energy inefficient homes increase the overall monthly costs of a home
  • The use of toxic materials can damage health and actually create serious health problems like asthma, allergies, skin issues, headaches, eye irritation and dizziness
  • The FHA 203k Rehabilitation mortgage allows a borrower to purchase or refinance a home while financing the costs of renovation to the property
  • A home renovation can utilize non-toxic building materials such as non-VOC (volatile organic compounds) paints; sealants that contain polyether rather than urethane or silicone bases; plywood that is free of formaldehyde; and natural clay plaster for walls instead of drywall (gypsum board)
  • This turns a “K” into a “Green K”, helping a borrower create a much healthier environment for the family living in the property
  • The FHA 203k can significantly reduce the time required to purge the market of real estate-owned (REO) and bank-owned stock
  • The REO stock move faster and the banks could sell their REOs for higher prices
  • Because the condition of a typical REO property is often quite poor, an owner-occupied homebuyer won’t have the cash to fix it up
  • The bank would have to drop the price drasticly to attract investors with the cash to renovate it
  • But the homebuyer who uses an FHA 203k Renovation loan can pay a higher price and have the money to renovate

For more:


Green Home Renovation: FHA 203k Renovation Loan Can Be Combined With FHA “Energy Efficient Mortgages” For Maximum Energy Efficient Improvements

20 12 2010

Energy Efficient Mortgage Program

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 Information by State
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FHA’s Energy Efficient Mortgage program (EEM) helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy efficiency features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage.


In 1992, Congress mandated a pilot demonstration of Energy Efficient Mortgages (EEMs) in five states. In 1995, the pilot was expanded as a national program.

EEMs recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage. FHA EEMs provide mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage. The borrower does not have to qualify for the additional money and does not make a downpayment on it. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, or savings and 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 thus encourage lenders to make mortgage credit available to borrowers who would not otherwise qualify for conventional loans on affordable terms (such as first time homebuyers) and to residents of disadvantaged neighborhoods (where mortgages may be hard to get). Borrowers who obtain FHA’s popular Section 203(b) Mortgage Insurance for one to four family homes are eligible for approximately 96.5 percent financing, and are able to fold closing costs and the upfront mortgage insurance premium into the mortgage. The borrower must also 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. For energy efficient housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD’s Title I Home 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 Section 203(b) insurance and can make the monthly mortgage payments are eligible to apply. The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating system (HERS) or an energy consultant. The cost of an energy inspection report and related fees may be included in the mortgage. Cooperative units are not eligible.

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

Eligible Activities: EEM can be used to make energy efficient improvements in one to four existing and new homes. The improvements can be included in a borrower’s mortgage only if their total cost is less than the total dollar value of the energy that will be saved during their useful life. Other eligibility requirements may be found in the Homeowner’s Guide.

Eligibility Requirements

 -   The borrower is eligible for a maximum FHA insured loan, using standard underwriting procedures. The borrower must make a 3.5 percent downpayment. This 3.5 percent downpayment is based on the sales price or appraised value. Any upfront mortgage insurance premium can be financed as part of the mortgage.
 -   Eligible properties are one to four unit existing and new construction. EEMs may be added to some other loan types, including streamline refinances.
 -   The cost of the energy efficient improvements that may be eligible for financing into the mortgage is the lesser of A or B as follows:A. The dollar amount of cost-effective energy improvements, plus cost of report and inspections, orB. 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.
 -   To be eligible for inclusion in the mortgage, the energy efficient improvements must be cost effective, meaning that the total cost of the improvements is less than the total present value of the energy saved over the useful life of the energy improvement.
 -   The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating report that is prepared by an energy consultant using a Home Energy Rating System (HERS). The cost of the energy rating report and inspections may be financed as part of the cost effective energy package.
 -   The energy improvements are installed after the loan closes. The lender will place the money in an escrow account. The money will be released to the borrower after an inspection verifies that the improvements are installed and the energy savings will be achieved.
 -   The maximum mortgage limit for a single family unit depends on its location, and it is adjusted annually. To find FHA maximum mortgage limits for any county in the country. The cost of the eligible energy efficient improvements is added to the mortgage amount. The final loan amount can exceed the maximum mortgage limit by the amount of the energy efficient improvements.

Technical Guidance:

EEM is authorized under Section 513 of the Housing and Community Development Act of 1992. Program regulations are listed on the EEM mortgagee letter web page.

Green Home Remodels And Renovations: Contractors And Architects Must Educate Homeowners On The Most Effective Way To Maximize A Home’s “Geography, Structure, Systems And Aesthetics”

17 12 2010

The FHA 203k Renovation Loan is the only true Green Home loan.

The remodeling contractor has to educate the homeowner to take the most effective approach for the project.

  • Geography :  “If you’re building a new home, the lot is the most important thing. If you’re doing a retrofit, you have to respect the existing architecture. You have to understand where the home is, what direction it faces, what you may need to change about the overhangs, things like that.”
  • Structural: “A rammed earth house may work great in New Mexico but it’s perfectly worthless in Michigan. You have to respect the structural aspects. People read about a certain system and want to build their addition in that way, but I have to tell them I can’t build that for you in this state. I’m in the Mid- Atlantic region where we have a mixed-humid climate that is just vicious to build in. You have to be on your toes to know what you’re designing in that market.”
  • Systems: “If you have a super air-tight house you don’t need a huge mechanical system. Or if you can use radiant instead of forced air or you can use less plumbing, or if you’re using solar thermal you don’t need as big a water heater. The structure will tell you a lot about what kind of systems to use.”
  • Aesthetics: “Too often homeowners start with the aesthetics, but that’s stuff you can go back and change. You have to know the systems first before you pick out recycled glass tile or a sustainable bamboo floor.”

For more: Energy-Efficient Homes Update: HUD And FHA To Pursue Programs To Facilitate Energy-Efficient Renovations Of Homes With FHA 203k Loan Remaining The Best Financing Available To Most Homebuyers And Homeowners

10 11 2010

 Vice President Joe Biden and U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan today announced a new pilot program that will offer credit-worthy borrowers low-cost loans to make energy-saving improvements to their homes. Backed by the Federal Housing Administration (FHA), these new FHA PowerSaver loans will offer homeowners up to $25,000 to make energy-efficient improvements of their choice, including the installation of insulation, duct sealing, doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems.

For more:

FundMyRemodel “Green Homes”: 1950’s Palm Springs Home Is Renovated Using Sustainable Materials And Energy-Efficient Design (Video)

8 11 2010

A look at a mid-century green remodel of a modern home in Palm Springs by architect Eric Corey Freed and contractors Green Guys Construction.

Prepared for the 3rd Annual Palm Springs Sustainability Summit.

SOURCE: KPSP News 2 – Eye on the Desert
DATE: November 2, 2010

“” Contractor Update: Homeowners Should Interview Qualified Contractors At Home For Remodels Where They Should Provide References And Perform A Thorough Energy-Efficiency Review Of Entire Home

28 10 2010

“Some had planned on getting a bigger house as their family expanded, but they can’t sell, so they’re adding another bedroom instead,”

“Anyone who’s legit in this business has four or five references saved on their phone,”

Many clients of First Choice Carpentry are looking to add value to their homes and improve their energy efficiency, according to Max Capestany, the Issaquah-based company’s project specialist.

The company has worked extensively in the Snoqualmie Valley, including framing houses on Snoqualmie Ridge. The tight housing market has changed some homeowners’ plans, he said.

“Some had planned on getting a bigger house as their family expanded, but they can’t sell, so they’re adding another bedroom instead,” he said.

Other homeowners are taking advantage of tax credits to improve their houses’ energy efficiency and save on their heating bills. Some are just taking advantage of a buyers’ market.

While it will continue to be a buyers’ market for the near future, tax credits for energy improvements will go away soon. The credits in the American Recovery and Reinvestment Act of 2008 expire at the end of the year.

Until then, homeowners can receive tax credit for installing Energy Star materials or appliances. The credit is up to 30 percent of the project’s cost or $1,500, whichever is lower.

Plenty of things have an Energy Star rating: windows, dishwashers, insulation, shingles and so on. A home remodel project is a big commitment for a homeowner, and there are some things they should keep in mind, Capestany said.

The first question they should ask is “Who’s doing the work?”

“The temptation of every homeowner is to get caught up in the types of materials being used,” Capestany said. “What’s most important is who you have doing the work.”

Don’t just go for the cheapest contractor. Check out their credentials and track record first.

When a contractor comes out to look at your house, ask for references on the spot, Capestany said.

“Anyone who’s legit in this business has four or five references saved on their phone,” he said.

Ask for the person’s contractor license number, and look it up on the website for the Washington State Department of Labor and Industry.

Check Angie’s List for customer reviews.

Talk to the contractor about how he or she does his or her work.

“Just taking time with the contractor in the home before any documents are signed” can save major headaches down the road, Capestany said.

If it is a general contractor, ask for a thorough energy-efficiency inspection of your house. This simple task can prevent a homeowner from wasting hundreds or thousands of dollars, he said.

Capestany recalled one house where the owner had installed an air conditioning unit because inside was sweltering hot in the summer.

The owner didn’t have a general contractor look at the house, which would have revealed that the attic was not properly ventilated and causing the house to heat up.

Walking around a house, Capestany said, he can quickly spot where a home is losing heat.

“Sometimes, I’ll go into a house and see 1970’s-era single-pane windows with aluminum casing,” he said. “When you stand next to the window, you can literally feel the cold air coming in.”

When crunching numbers, homeowners should consider a project’s cost versus the expected savings, Capestany said. Remodeling Magazine has useful cost-versus-value comparisons.

Seek information from professionals.

“Home shows are a great source of information,” he said.

Some homeowners are also taking advantage of the fact that it is a buyers’ market.

Ahren and Allie Johnson hired First Choice Carpentry to redo the exterior of their home in North Bend.

The project involved adding gutters, masonry work, a new entryway, new window trim and painting.

For more: “Green Mortgage” Update: The FHA 203k Is The Only Real “Energy And Green Improvement” Mortgage As Few Lenders Bother To Understand And Offer “Energy Efficient Mortgages” (EEM) And “Energy Improvement Mortgages” (EIM)

22 09 2010

These programs are not new; they have been around very a long time, 15 to 20 years. Lenders are not offering them because they don’t know enough about them and they don’t think they are necessary. They are not required to even discuss them.

What is on the horizon for green mortgages?
Short of a true green mortgage (which does not exist), the closest program is the FHA 203(k). This program can allow you to add both energy and green improvements to a home. There’s a lot more noise about them right now. I believe we will see some changes to the programs in the months to come but I encourage everyone in the industry to ask that their lender learn about these programs and start offering them.

What are EEMs and EIMs?
These are loans that credit a home’s energy efficiency in the mortgage itself, giving borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage. They allow borrowers to stretch their debt-to-income qualifying ratio in order to qualify for a larger loan amount and a better, more energy-efficient home.

An energy efficient mortgage (EEM) is typically used to purchase a new home that is already verified by a third party as energy efficient, such as an Energy Star-qualified home. An energy audit, performed by a certified energy rater, is required to prove efficiency and report expected monthly savings.

Energy improvement mortgages (EIMs) are for existing homes that need an energy retrofit. An energy audit identifies items that will make the home more energy efficient, and the costs of these improvements are added to the mortgage loan. EIMs are available for either a purchase or refinance of an existing home.

EEM and EIM guidelines are different depending upon the type of loan, so be sure the lender you are working with understands the details. FHA, VA, Fannie Mae, and Freddie Mac all have EEM and EIM programs.

The market for these types of mortgages should be very popular considering the fact that out of 128 million existing homes in this country, 95 million need some type of energy retrofit. The average American home is about 35 years old. Insulation wasn’t required until the mid ’70s. Energy efficiency wasn’t really considered until the 1990s. Look at all these homes that need energy retrofits and then look at all the refinances we’ve had recently: How many of the owners of those homes were offered an EIM? Not many, and getting an accurate count has been near impossible. It’s a crime.

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