FHA 203k Energy Efficiency Mortgage

Are you looking for a solution to save on energy costs?  Are you uncertain about the future cost of energy?  You may want to consider an Energy Efficient Mortgage.

Energy efficient improvements can save you thousands over the life of home ownership and financing at today’s low rates might make financial sense.  The Energy Efficient Mortgage (EEM) is available for purchase and refinance FHA 203k transactions.

This loan program eliminates the need for you to spend cash or take out an additional mortgage loan to make energy improvements after you purchase a home.  It is also available for refinance.

The goal of the program is to help make energy efficiency and conservation a way of life.  Energy costs are on the rise and you cannot control how high energy costs will rise.

However,  you can take proactive steps now to use this loan to increase energy efficiency in your home and reduce your energy costs.  The estimated energy cost savings can off-set the increase in mortgage payment in most situations.


The FHA 203k loan is used incorporating energy efficient improvements into your contractor estimate.   This is the perfect opportunity to turn an old energy deficient home into a new green energy efficient home that used the latest green technology to save on your energy bills.


The process includes having a HERS Consultant create a customized HERS Report that evaluates the energy efficiency of your home, or home you are going to buy, and offers suggested improvements that will reduce energy consumption.

The HERS consultant will review your renovation plans and inspect your home. The inspection and planned improvement review will result a high tech computer generated HERS score that estimates your annual energy cost savings.

This is a great opportunity to take advantage of low rates to have an ENERGY STAR qualified home that can increase energy efficiency by 30% or more.


The Energy Efficient Mortgage Loan program is available to anyone who meets the income and credit requirements for FHA’s Section 203k and is able to make the monthly mortgage payments.

The cost involved in adding energy efficient features to the home and an estimate of the energy savings must be determined by a home energy rating system or a qualified energy consultant.  Up to $200 of the cost of the energy inspection report may be included in the mortgage.


There are 5 areas that you should consider improving with your renovation loan to save on your energy costs and have a green rated home:

  • Water Conservation
  • Energy Efficiency
  • Resource Conservation
  • Community
  • Indoor Air Quality

Possible ideas for a kitchen include Mammalian flooring, energy AND water efficient appliances, bamboo counter-tops and floors, and a composting appliance.

Some other energy efficient renovation ideas that you should consider include the following:

  • Refinish floors with low VOC finishes and non-VOC paint
  • VOC:  Volatile Organic Compound which offs gas into the air lowering air quality
  • Insulate the Attic, Floors, Pipes, Ducts and Walls of the Exterior of Building
  • Replace Roof With Cool Roof So what is a cool roof? A cool roof is one that reflects the sun’s heat and emits absorbed radiation back into the atmosphere.
  • Upgrade appliances to Energy Star appliances
  • Weatherstrip all doors and openings
  • Replacing doors, and windows with low-e windows
  • Water conservation toilets and shower heads, tank less water heater
  • Install active and passive solar technologies – net zero
  • Replace furnace and cooling system with energy efficient systems
  • Replace or fix chimneys


It is highly likely that the majority of homes that you will tour on your home search could use an Energy Efficiency makeover.  It is also highly likely that energy costs will continue to rise.

Smart buyers are taking advantage of historically low rates and 203k renovation funds to make energy efficient green home improvements that result in saving thousands over the life of ownership.

IMPROVEMENTS MAY EXCEED LOAN LIMITS (certain restrictions apply)

An EEM can be used with both the Streamline and a Standard 203k loan.  One interesting combination is to use the Streamline (k) with an EEM.  If your repairs will exceed the $35,000 limitation, the energy-efficient improvements can be pulled out of the 203k calculation (use your energy audit to identify the energy improvements).

Once the 203(k) repair escrow is calculated, the energy improvements can be added back onto the loan, exceeding the $35,000 threshold if needed.

The FHA 203k Energy Efficient Mortgage EEM is a smart loan that can save you thousands over the life of home ownership.  This loan should be in everyone’s financing playbook.

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