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What Are FHA Energy Efficient Mortgages?

January 14, 2021

Buy or Build a House On Your Own Lot in 2020

What is an FHA Energy Efficient Mortgage (EEM)? Whether you want to buy existing construction or choose to build a house on your own lot using an FHA One-Time Close mortgage, the FHA EEM can add funds to your loan.

You read that correctly–these funds are added only after the loan amount has been calculated–this is an add-on to your loan and not a higher loan amount to qualify for (see below)

Are you a first-time home buyer? Don’t mistake an Energy-Efficient Mortgage as a type of home loan option like an FHA Construction Mortgage or FHA Rehabilitation Mortgage. As mentioned above, an EEM is quite different.

Why EEM Funds Are Added After Your Loan Amount Is Calculated

The Energy Efficient Mortgage is an add-for purchase loans including FHA Rehab loans, FHA One-Time Close Construction Mortgages, Condo loans, and FHA 203(b) mortgages. They can also be used with FHA refinances.

What An EEM Includes

The FHA Energy Efficient Mortgage helps borrowers save money on their utility bills after they have moved in and have had the improvements made. This, the FHA official site says, is done “by enabling them to finance energy efficient improvements with their FHA-insured mortgage.”

An EEM makes extra funds available with your home loan. These funds can only be used to add energy-saving improvements, upgrades.

The FHA EEM Package

The FHA calls the upgrades an “energy package” and requires the use of a qualified home energy assessor–once the assessor has made the recommendations and the lender approves of your proposed improvements, the loan is processed calculating the loan amount you must qualify for, and adding the EEM money AFTER that loan amount is approved.

You are not required to qualify for a higher loan amount when using the EEM.

The program requires the upgrades to be cost-effective and the improvements to the home must be lender-approved.

EEM Money: How Much Can You Get?

Your EEM amount will be calculated as the lesser of:

An energy package with the amount based on the home energy assessment;


The lesser of 5 percent of:

  • the Adjusted Value;
  • 115 percent of the median area price of a Single Family dwelling; or
  • 150 percent of the national conforming mortgage limit.

FHA Energy Efficient Mortgages should be discussed with your lender as early as possible in the loan process.

You will need to consult with an energy professional as mentioned above and this process may take longer than you think depending on circumstances and demand. Give yourself plenty of time to get your extra legwork on an FHA EEM loan accomplished for best results.

Want More Information About One-Time Close Loans?

One-Time Close Loans are available for FHA, VA and USDA Mortgages.  These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs.

We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products.

We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.

FHANewsblog.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.

Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.

Your email to [email protected] authorizes FHAnewsblog.com to share your personal information with a mortgage lender licensed in your area to contact you.

  1. Send your first and last name, e-mail address, and contact telephone number.
  2. Tell us the city and state of the proposed property.
  3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
  4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis.   If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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