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Energy Efficient Mortgage (EEM)


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The FHA Energy Efficient Loan program is a proprietary loan program created out of the clear need to provide mortgage-related financial incentives for energy efficient and healthy homes.

Did you know that the federal government can help you make energy improvements to your home? If you've considered remodeling, take the time to learn more about the FHA's Energy Efficient Mortgage (EEM) Program. You might qualify for a higher loan amount to fund energy improvements that will lower your living expenses.

An EEM funds the costs of planned energy-efficiency improvements to your home. They can be federally insured through the Federal Housing Authority (FHA) or Veteran's Administration (VA). They may also be made without federal backing, either through conventional channels, or through an Environmental Protection Agency (EPA) program called ENERGY STAR. Each of these channels has slightly different terms and qualification requirements.

Qualified energy upgrades.......

Common upgrades include ductwork and insulation repairs, and installation of modernized heating and air conditioning systems, energy-efficient windows, and/or energy-efficient water heaters.


Energy-efficient homes cost less to own than non-efficient homes, though they may start off with higher price tags.

Older Same Home with

existing home energy improvements

Home price $ 150,000 $ 154,816

(90% mortgage, 8% interest)

Loan amount $ 135,000 $ 139,334

Monthly payment* $ 991 $ 1,023

Energy bills + $ 186 + $ 93

The true monthly

cost of home ownership $ 1,177 $ 1,116

Monthly savings - $ 61

All EEM programs require that the financed energy upgrades result in utility cost savings over time. The potential savings must be documented by a Home Energy Rating Systems (HERS) report. A HERS report rates your home's energy efficiency before any upgrades, and then prepares a cost/benefit analysis on potential upgrades. Qualifying upgrades are those whose estimated costs of implementation are less than the resulting savings. Upgrades costing more than the total savings they can provide are not recommended.

Benefits of EEMs......

Because EEM lenders allow additional funding for the cost of the energy upgrades, you'll qualify for a larger loan amount. Your lender may recognize that your cost of living will be lower after the planned upgrades, which should also increase your borrowing power. If you qualify for an FHA- or VA-backed EEM, you'll likely have access to better rates and terms. Lastly, the EEM will give you the resources necessary to increase the value of your home and enhance your quality of life.

The steps to acquiring an EEM refinance are very similar to applying for a conventional loan. Let your prospective lender know that you're considering an EEM. An experienced lender can offer advice as to which program would be most appropriate for your situation. You'll also need to order a HERS report as soon as possible; this will indicate which upgrades qualify for financing.

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