Energy Efficient Mortgages an Untapped Resource in the Quad Cities

By
Real Estate Agent with Mel Foster Co

Upon reading this most of you are probably unaware such a thing even exists. I was also oblivious to Energy Efficient Mortgages (EEM's) and I sell real estate for a living. It was only after entering into my EcoBroker® Certification course several months back that Energy Efficient Mortgages were brought to my attention. Subsequently, I checked with a couple local Quad City lenders who were listed as qualified EEM providers to see exactly what kind of demand existed, if any, for this type of financing. Without surprise I discovered that the idea of even a green home existing in the Quad Cities was almost as rare as the EEM's in question. According to both lenders I spoke with, they acknowledged that such a financing tool existed however, there simply was not a demand for it. HELLO! Talk about a niche market. In my opinion it's because the general public does not know a financing tool exists. There may be a little more work involved with closing these types of loans but, let's consider the long term benefits. After all that's what being green is all about.   

Keep in mind while reading this that I am not an expert in the field of Energy Efficient Mortgages. Each lender has their own unique criteria & guidelines they go by. If any of you would like to contact me and get the list of lenders available for this type of financing I would be happy to get that to you.

The nuts and bolts of obtaining an EEM are pretty strait forward. The home in question will first need to have a Home Energy Rating System (HERS) done to determine a couple things. Number one, Is the home already energy efficient, and if so how much? Is it Energy Star Rated or better yet, LEED Certified? Second, the HERS report should also include any potential upgrades to make the home more efficient and how much those improvements will cost. The third and final determination will be the overall cost savings on utility bills by adapting these changes and improvements. The lender will analyze the information provided in the report and determine which EEM is most suitable. Wait a minute, there is more than one type of EEM?? Yes, there may be several variations and options for the borrower to consider.

The Energy Efficient Mortgage has two main categories and different options under each one. The first is the basic Energy Efficient Mortgage (EEM) which generally relates to homes that are already Energy Star Rated or LEED Certified. The borrower can benefit from reduced closing costs, a slightly cheaper interest rate or the ability to finance a bigger more expensive home. The buyer can get themselves into a bigger home due to the lenders ability to stretch out the borrower's debt-to-income ratios. This can be done because of the proposed savings on future utility bills.

The second and more common EEM is the Energy Improvement Mortgage (EIM). These are used to purchase new or existing homes that will have energy efficiency improvements made to them. EIMs allow borrowers to include 100% of the cost of energy efficiency improvements to an existing home in the mortgage. EIMs allow the borrower to use the money saved in utility bills to finance energy improvements. Under the EIM fall different guidelines depending on whether the buyer is approved conventionally, through FHA (Federal Housing Authority) or VA (Department of Veteran Affairs). I will allow your lender (available upon request) to discuss the actual guidelines on the above mention loans.

Ultimately, the EEM allows a buyer to capitalize on being green. Click the link to see an example of how savings can occur from making a few efficient improvements.  http://www.pueblo.gsa.gov/cic_text/housing/energy_mort/energy-mortgage.htm

Posted by

the Buy and Sell guy

                        

Life-long resident of the Iowa Quad Cities specializing in residential new construction, resales, investment properties and lots and land. Assisting buyers and sellers in Davenport, Bettendorf, the surrounding Scott and Clinton counties. Licensed in Iowa.

The Quad Cites only Certified EcoBroker®

Mel Foster Co. l 2215 E Kimberly Rd. l Davenport, IA 52807

www.qcAreaHomes.com

ckaufmann@melfosterco.com

563.570.1106

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