Energy Efficient Mortgages Reduce Your Monthly Housing Expenses

When a lender figures the monthly mortgage amount that a buyer can afford whether it’s a purchase or a refinance, the amount is calculated to include principle, interest, taxes and insurance or PITI.  But there’s another cost that is beginning to be taken into consideration—utilities.  If you buy an older home with old single pane windows, old appliances, an old furnace, poor insulation, etc., the monthly cost to own the home can increase dramatically.  If you don’t have the money to replace some of these items immediately you could spend hundreds of dollars more each month on energy   costs.  And if you decide to make some of the improvements or buy appliances on your credit card that just adds to your debt at pretty high interest rates.

But the FHA 203(b) loan, or Energy Efficient Mortgage (EEM) Program can help buyers and refinancers to make their homes more energy efficient and save a considerable amount on their monthly utility bills.  “The EEM Program recognizes that the improved energy efficiency of a house can increase its affordability by reducing operating costs.  Because the home is more energy efficient, the occupants will save money on utility costs” and significantly reduce the amount of money needed each month to operate the home. So here’s how it works.  When you take out an FHA 203 (b) loan you can add up to $8,000 to the loan amount even if it goes over the FHA maximum loan amount or over what you qualify for.  This additional amount is at the same rate as the original loan.  So if you lock in at say, 4.25%.  The additional amount is rolled right into the loan at the same rate. Here are some of the things you can do to improve your home’s value and energy efficiency: New windows, insulation, passive or active solar improvements, heating and air conditioning systems, appliances.  Now needless to say $8,000 won’t cover all these things.  So the borrowers needs to determine what things they want to do and how much it will cost.

Prior to settlement the borrower submits a home improvement energy package and the costs to the lender.  Then a HERS  (Home Energy Rating System) energy rater has to inspect the property to determine whether the cost savings over the life of the loan will be greater than the loan amount.  The buyer, seller, lender or agent can pay for the cost for the inspection.  Once the rating assessment has been done and a satisfactory rating has been determined, the lender can escrow the amount of money in the proposal.  All work must be completed within 90 days. Most lenders don’t even know about this loan or if they do they don’t offer it.  Don’t ask me why.  So I was very happy when I found a wonderful loan officer at PMG Mortgage who made it his business to research the loan and convince his company to offer it to borrowers. Vince Coyle  is ready and willing to work with borrowers on this loan product.

Given the low interest rates right now this loan is an excellent way to get a lot more bang for your energy efficiency buck.  Plus, after you make some of these improvements most states have some tax credits and incentives that you might be eligible for.  Here are the federal tax credits that are available now.



Gayle Fleming


My purpose is to serve my clients and advocate for their highest and best good, so they attain their real estate goals.


Short Sales Can Be Good For Buyers and Better Than Foreclosures for Sellers

So what exactly is a short sale and why might it be a good deal for buyers and sellers?  A  home owner may owe more than their home is worth because values have dropped dramatically and/or they have an adjustable rate mortgage that resets at a higher rate causing their monthly mortgage to substantially increase.  Rather than allow their home to be foreclosed upon, they can request permission from their bank to sell the home for less than is owed. This saves the bank from having a foreclosed property on the books as red ink and incurring the associated expenses.  The home owner’s credit report will show that their mortgage was “satisfied as agreed” rather than as a foreclosure.  A short sale will sell for less than is owed on the home but generally for more than a foreclosure that has been lingering on the market and not being maintained.

This year I have been the listing agent on a couple of short sales.  Unlike some agents, I am not running a short sale assembly line. When I list a short sale  I market it, stage it, print brochures, hold open houses…in other words I treat it like every other listing. Short sale listings are not the ugly step sister of real estate…at least not in my book.  But they have gotten a really bad rap and a lot of real estate agents and buyers are  turned off by the prospect of writing a contract on a short sale. Although a buyer can expect to pay below market value for a home listed as a short sale they are also  known to take up to six months to settle if they ever settle at all.  I have heard so many stories of  buyers waiting months and months only to either give up and move on or have the bank not approve their offer.  Generally it is assumed that the bank or banks are the sole culprit in the long drawn out process of getting a short sale approved and to settlement.  That’s not necessarily the case. An agent who does not understand short sale bank procedures and who doesn’t follow up and keep meticulous records can also slow the process down and cause the sale to die.  It’s important that the listing agent on a short sale have experience in this type of sale and the selling agent should at least be familiar with the process.  Here are some good guidelines for anyone pursuing a short sale to review.

Unfortunately many banks don’t have the staffing to handle all of the short sale requests that they receive nor do they have the systems in place for the process to run smoothly.   The sales contract package that banks require in order to process and evaluate a short sale is daunting.  The required documentation can total seventy-five plus pages. If even one document is missing the contract won’t get processed and the bank is unlikely to call the agent to let them know.  In most banks the short sale staffing is inadequate and employees don’t have time to follow up on missing and incorrect documentation. So the onus is on the agent to make regular follow up calls without being annoying.

The primary benefit for a purchaser is that they will get a below market value home usually in much better shape than a foreclosure.  Short sale sellers are usually still living in their homes and maintaining them. Their homes aren’t likely to be trashed or have extensive repairs that need to be made.  So a short sale purchaser can invest the savings on the sale price in upgrades that improve energy efficiency by purchasing new low-e windows, a new EnergyStar rated heating and air conditioning system or adding good insulation for example.

Gale10    EB-Certified-Logo-for-web2  GreenLogo_CMYK[1]


@ecogayle on Twitter

Use the FHA 203K Loan to Rehab Your New Older Home

So you want to buy a home but the only homes you can afford are older and/or need  repairs.  Maybe it’s a foreclosure or short sale that would be a good deal if only you had the extra money to make repairs; put in new appliances, a new furnace or new windows, for example.   The FHA 203K Streamline loan allows a borrower to tack on up to $35,000 (provided they qualify) in order to make improvements to the home.

Currently  the Federal Housing Authority (FHA)  is writing fully 35% of all new mortgage loans. But the 230K Streamline is very under utilized. If a home needs some kitchen or bath updating, a new furnace, A/C, etc, the money  for these improvements can become a part of the mortgage and the improvements can be made  without a buyer going into credit card debt or using personal savings.  The rate for the 203K Streamline is slightly higher than the conventional FHA but much lower than a credit card interest rate and is spread out over the 30 year life of the loan. Here are some of the improvements the loan can be used for:

  • Roofs, gutters and downspouts
  • HVAC systems (heating, venting and air conditioning)*
  • Plumbing and electrical
  • Minor kitchen and bath remodels
  • Flooring: carpet, tile, wood, etc.
  • Interior and exterior painting
  • New windows and doors*
  • Weather stripping & insulation
  • Improvements for persons with disabilities
  • Energy efficient improvements*
  • Stabilizing or removing lead-based paint
  • Decks, patios, porches
  • Basement completion and waterproofing
  • Septic or well systems
  • Purchase of new kitchen appliances or washer / dryer*

Certain improvements can get you a federal tax break. If you make improvements to increase the energy efficiency in your home that meets Dept. of Energy’s Energy Star standards, you can deduct 30% of the cost up to $1500.  The astericked items are some that qualify. 

When you’re ready to buy or sell a home, call me, your going green real estate advisor.

Gayle Fleming, Keller William Realty            703-625-1358   

Follow me on Twitter@ecogayle