There are a lot of things that we can do to live more sustainable lifestyles. When it comes to being an eco-friendly homeowner, finding the right mortgage can be as crucial as selecting the perfect home.
For veterans and active-duty military personnel, there’s an innovative financing option that not only supports the dream of homeownership but also promotes energy efficiency — the VA Energy Efficient Mortgage (EEM).
This article will discuss everything you need to know about this home financing solution.
What is a VA Energy Efficient Mortgage?
The VA Energy Efficient Mortgage, or a VA EEM, is a specialized home loan program designed to help veterans and military members make energy-efficient home improvements.
Managed by the Department of Veterans Affairs, this mortgage option enables eligible individuals to make environmentally friendly upgrades without a larger down payment or increased interest rates.
If you’re a veteran or military member who’s considering homeownership, it might be worth exploring this eco-friendly and cost-saving home financing solution. You could even apply for a VA home loan to kickstart your journey.
How Does It Work?
The magic of a VA EEM lies in its ability to incorporate the cost of energy-efficient improvements into the overall mortgage amount.
This means that veterans can borrow additional funds, up to a specified limit, to implement various energy-saving enhancements such as solar panels, energy-efficient windows, insulation, and HVAC upgrades. The increased loan amount covers both the home’s purchase price and the cost of approved energy-efficient improvements.
Some common energy-efficient upgrades that can be financed through a VA EEM include:
- Solar panels
- Energy-efficient windows
- Insulation improvements
- High-efficiency HVAC systems
- Energy-efficient lighting
Benefits of VA Energy Efficient Mortgages
Here are some of the benefits of taking out a VA Energy Efficient Mortgage:
- Cost savings: One of the primary advantages of a VA EEM is the potential for long-term cost savings. Energy-efficient upgrades can reduce utility bills, making homeownership more affordable in the long run.
- Lower environmental impact: VA EEMs contribute to a more sustainable and eco-friendly living environment by encouraging energy-efficient improvements. Homeowners can also minimize their carbon footprint and conserve energy resources.
- Increased home value: Energy-efficient upgrades save money and enhance the home’s overall value. This can be especially beneficial if homeowners decide to sell their property in the future.
- Flexible financing: VA EEMs offer veterans flexibility in financing energy-efficient improvements without requiring a higher down payment or imposing an increase in interest rates.
Eligibility and Requirements for VA Energy Efficient Mortgages
If you’re considering applying for a VA Energy Efficient Mortgage, here are a few things you should know:
- Basic VA loan eligibility: To be eligible for a VA Energy Efficient Mortgage, applicants must first meet the fundamental criteria for a regular VA home loan. This typically involves having a valid Certificate of Eligibility (COE) that establishes the borrower’s military service record. Veterans, active-duty service members, and particular National Guard and Reserves members are generally eligible.
- Energy assessment and cost-effective analysis: To qualify for a VA EEM, proposed energy-efficient improvements must undergo an energy assessment. This assessment evaluates the cost-effectiveness of the upgrades, ensuring that the projected energy savings justify the additional financing. The improvements should comply with the energy efficiency standards set forth by the HUD (U.S. Department of Housing and Urban Development).
- Maximum loan limits: The additional funds borrowed for energy-efficient improvements are subject to specific limits. The total loan amount, including the purchase price of the home and the cost of approved energy-efficient upgrades, cannot exceed the VA’s established loan limits for the specific geographical area.
- Verification of contractor qualifications: The contractor hired to perform the energy-efficient upgrades must be qualified and approved. Lenders may require verification of the contractor’s credentials and expertise in implementing energy-efficient improvements.
- Documentation and appraisal: As part of the loan application process, borrowers must provide documentation detailing the proposed energy-efficient upgrades and their associated costs. The lender may also require an appraisal to assess the home’s value after the improvements are completed.
- Compliance with local codes and regulations: Energy-saving enhancements need to adhere to the building codes and regulations set by the local authorities. Ensuring that the improvements meet or exceed these standards is essential for loan approval.
- Loan funding fee: Similar to regular VA loans, VA EEMs may be subject to a funding fee. The funding fee represents a singular payment made by the borrower, aiming to mitigate the expenses associated with the VA loan program. The fee amount varies based on military service category, down payment amount, and whether it’s the borrower’s first or subsequent use of the loan benefit.
By integrating energy-efficient upgrades into home financing, veterans can enjoy a comfortable, eco-friendly living space and contribute to a greener future. As the demand for environmentally conscious living increases, VA EEMs offer a compelling solution for those who aspire to own a home that is both energy-efficient and cost-effective.
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