Can I Get a Federal Loan for Energy Efficient Home?
It is possible to obtain a Federal loan that you can spend to make your home more energy efficient! You can get the loan through several different government agencies and programs.
You may even qualify for a government grant that does not have to be repaid if you live in certain areas where rehabilitation of homes is being encouraged.
If you are an American Indian or member of another special citizen group you may qualify for special home improvement grants.
One of the best ways to get a Federal loan is to utilize a mortgage guarantee that allows you to finance a home for more than the purchase price.
The remaining mortgage amount is used to improve the home and make the systems more energy efficient.
You must be able to qualify financial to purchase a home but may also be able to refinance your current home to take advantage of this government program. The energy improvements made must be cost effective.
Assuming The Cost
This is determined by assuming the cost of the improvements that are financed in the mortgage will be recouped by the cost of the energy saved.
This is estimated by a report from an energy consults using HERS (Home Energy Rating System). The report must be paid for but the cost can be part of the financed improvements to reduce out of pocket expenses.
This is an FHA (Federal Housing Authority) insured mortgage. Application is made through the agency for Housing and Urban Development (HUD) and is arranged through their counseling agency.
It can be a drawn out process to arrange a Federal loan but the low cost of the mortgage makes the paperwork and effort worthwhile.
It is this program that allows you to buy a home that has not been properly maintained or was built 30 years ago and never upgraded and turn it into a dream home at a price you can afford.
New Pilot Program
In 2011 a new programs was implemented to offer low cost federal loans to qualified borrowers for energy-saving improvements to their homes. These are FHA PowerSaver loans and provide up to $25,000 of a Federal loan for home upgrades.
Qualifying home improvements include installing insulation, sealing ductwork, doors and windows, HVAC systems, energy efficient water heaters, solar panels and geothermal systems.
Currently this is a national pilot program limited to a few selected lenders. The loans are guaranteed by the FHA and lenders are required to target the loans to areas where there has been action to improve home energy use.
Those areas may be running consumer education ads or programs. In addition, qualified contracts must be used to complete the work. The pilot program has been approved and the first loans will be available in the last quarter of 2011.
Federal loans require homeowners to have the motivation and the funds to make energy improvements. These are not loans made to those who have problems paying their current mortgage but the credit requirements are not too difficult to meet.
A minimum credit score of 660 is required and a maximum debt to income ratio of 45% will rule out some applicants. The improvement loan combined with the current mortgage balance cannot total more than 100% of value of the property after improvements have been completed.
This is not a loan available for second homes or vacation homes but is limited to you primary, detached, owner-occupied residence. An exterior appraisal of the property is required.
If you are buying a home that is in good condition but has not been upgraded for many years, this PowerSaver loan could be the answer to your needs. The terms are quite beneficial for the homeowner and there is a push to make the pilot program a success so it can be expanded.
Another way to use a federal loan for energy remodeling is through the Section 203(k) insurance that allows a new buyer to finance his home and the cost of rehabbing the home in a single mortgage insured by the FHA.
This loan is also available to homeowners refinancing their current home in order to upgrade or remodel it.
This program is a standard federal program that is available to anyone qualified for the monthly mortgage payments. The FHA can provide you with the latest loan terms for this program and direct you to qualified, approved lenders to make application.
It can be a challenge to find the best federal loan for home energy rehabilitation. However, the liberal terms of FHA mortgages make this avenue worth pursuing.
If you have good credit, a steady income and the patience to wade through paperwork, you can end up with the home of your dreams, a mortgage you can easily afford and a house that is energy efficient and saves you money every day.
You can also consider using other types of alternative energy resources to design a more energy efficient home!