October 31, 2007
ENERGY STAR® Homes Qualify for
FHA's Energy Efficient Mortgage Program
an Energy Star home has always been a prudent investment,
with the value of the monthly energy savings exceeding the
added mortgage cost of buying the additional energy features.
This is financial leverage for the buyer: free cash flow that
allows lenders to offer Energy Star homebuyers better mortgage
an Energy Efficient Mortgage (EEM), lenders like FHA are allowing
Energy Star homes to qualify for higher mortgages based on
the energy savings. Under the FHA EEM program, homebuyers
can finance 100% of the additional cost to buy up to Energy
process for qualifying for the EEM is simple. Once it is determined
that both the borrower and the property are eligible for an
FHA mortgage and the buyer selects an Energy Star home design,
the home retailer completes the EEM application available
from the Manufactured Housing Research Alliance (MHRA). MHRA
determines the allowable increase in the mortgage amount,
and will provide that information directly to the retailer
and lender for completing the loan application.
EEM enables the buyer to put the value of the energy savings
back into the home. Features of the FHA EEM include the following:
- Any FHA-approved lender can approve the
- The EEM is initially underwritten as if
the Energy Star package did not exist. When qualifying a
homebuyer, the cost of the energy improvements is subtracted
from the sales price of the home.
- The homebuyer qualifies for a 2% increase
in their qualifying income ratios, and these ratios are
calculated on the cost of the home before the energy improvements.
- Up to $8,000 can be added to the loan amount,
based on a calculation that takes the expected energy savings
into account. The borrower does not have to qualify for
the additional financing or make a higher down payment.
- The calculation for the private mortgage
insurance premium is based on the cost of the home before
the energy improvements.
- The home is not subject to an on-site home
energy rating in order for a homebuyer to qualify for an
A copy of FHA's EEM Mortgagee Letter, the
letter from FHA approving Energy Star manufactured homes as
eligible for the EEM and MHRA as a home energy rater, and
the application for a Manufactured Home Energy Report can
be downloaded here.
For more information, contact Gwynne Koch at firstname.lastname@example.org
or 212-496-0900 x12.
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