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.

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Gale10

Gayle Fleming

http://www.goinggreenhomesva.com

gaylefleming48@aol.com

703-625-1358

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

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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

 www.goinggreenhomesva.com              gayle@goinggreenhomesva.com        703-625-1358   

Follow me on Twitter@ecogayle

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