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The FHA Energy Efficient Mortgage Program

May 2, 2022


In April 2022, the Department of Housing and Urban Development announced support for a Washington D.C. program called “Solar For All”, a program HUD says will help, “ensure that residents of HUD-assisted properties in the District are able to access the program without experiencing an increase in their housing costs.”

According to a press release on the HUD official site, the “Solar for All” project is intended to bring solar energy to 100 thousand low-to-moderate-income families in the D.C. area.

This announcement is part of a Biden administration push to “address climate concerns, and create benefits for residents of HUD-assisted households through equitable deployment of community solar” according to HUD.

But did you know that you don’t have to live in Washington D.C. to consider a solar upgrade with an FHA loan? 

There is an add-on to FHA mortgage loans and FHA refinance loans called the FHA EEM — the FHA Energy Efficient Mortgage — which allows extra funds to be added to the loan amount (after the loan limit for the home has been calculated) for approved energy-saving upgrades.

Those upgrades can include solar energy. With an FHA EEM, you’ll work with a certified energy consultant to determine the best upgrades to the home, and then present your project to the lender. 

Only approved upgrades and additions can be paid for with FHA EEM loan funds; this is not a case where you get unrestricted cash back like an FHA Cash-Out Refinance loan.

The FHA EEM is, as hinted at above, not a standalone mortgage, but an add-on to the loan amount. Your purchasing power is not diminished with an FHA Energy Efficient Mortgage; that is to say that the FHA loan limit used to approve your purchase is calculated without the amount of the EEM. 

That money is added later and does not count against your loan limit to buy or refinance the home.

When you apply for any type of FHA mortgage including cash-out refi loan options, FHA Streamline Refinances, FHA One-Time Close construction loans, or even an FHA 203(k) Rehabilitation mortgage, you have the ability to request an FHA EEM in conjunction with the loan.

Adding these funds to your loan amount has the potential to raise your monthly mortgage payment, along with any other add-ons to the loan amount like discount points. If you choose to finance the FHA Up-Front Mortgage Insurance Premium, too you may be looking at a higher mortgage payment than you realize. 

Be sure to ask a loan officer about how much the payment might increase based on these additions to the loan and compare the monthly obligation without those add-ons, too.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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