What is An FHA-insured Energy Efficient Mortgage and How Does it Work?

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What is An FHA-insured Energy Efficient Mortgage and How Does it Work?

Throughout California, interest in energy efficiency remains high. The state has a more than four-decade history of programs and initiatives that have reduced greenhouse gases and emissions, saved money and improved the environment. The following information outlines some residential energy efficiency benefits and gives you a comprehensive introduction to finding and securing an energy efficient mortgage.

Cal-EEM Energy Efficient Mortgage

The Cal-EEM energy efficient mortgage is made available through Cal-HFA, the California Housing Finance Agency. It is usually combined with an additional Cal-EEM grant for making energy efficient improvements in the home. This particular energy efficient mortgage is insured by the Federal Housing Administration (FHA).

Insured mortgages allow lending institutions more freedom in making mortgage loans. They typically have lower interest rates and require lower down payments than other types of mortgages. Persons with lower credit scores or other issues that could prevent them from getting a conventional mortgage loan are likely to have more success getting an FHA-insured loan.

Extra Credit Teacher Program

The Cal-EEM + Grant Program energy efficient mortgage can be combined with the Extra Credit Teacher Program (ECTP) to provide home purchasers with assistance making the down payment. Teachers, administrators, school staff members and school district employees in any California K-12 public school, including Charter Schools and county/continuation schools, may qualify for this program.

Basic Cal-EEM Energy Efficient Mortgage Requirements

Borrowers seeking a Cal-EEM + Grant Program loan must meet some basic requirements.

  • The borrower must occupy the property as a primary residence.
  • The borrower must participate in a course of homebuyer education and obtain a certificate showing completion of the education program.
  • The borrower must meet Cal-HFA income limits established for the program.

The property itself is also subject to certain limitations and requirements.

  • The property must be a single-family, one-unit residence (including condominiums and PUDs).
  • The price of the property cannot exceed Cal-HFA’s sale price limits for the county in which the property is located.
  • Manufactured homes must be on a permanent foundation.

If there are conflicting guidelines for either borrowers or the property, the lender is required to follow the more restrictive guidelines.

Mortgage seekers should also be aware of some additional property guidelines that must be followed.

  • There is a five-acre maximum on the size of the property.
  • Leaseholds/land trusts and co-ops are not permitted.
  • Condominiums must meet the guidelines of the first mortgage.
  • Property must meet the requirements of the mortgage guarantor/broker.
  • Property must follow the relevant FHA-EEM guidlines.
  • Property must be subject to a Home Energy Rating System (HERS) report. This report provides a detailed analysis of a home's energy efficiency and a score based on the Home Energy Rating System (HERS) Index, a national standard for measuring energy performance.

Your Übermortage loan officer can tell you about the full range of requirements for both borrowers and the property itself.

Characteristics of an Energy Efficient Home

Once you have secured an energy efficient mortgage to purchase your new home, what can you expect to find in an energy efficient residence? Residential energy efficiency is most often represented by:

  • A tight envelope. The envelope is the external walls and shell of the home that creates the barrier between the outdoors and the indoor living spaces. A tight envelope means that there will be very few cracks, gaps and other openings that allow air leaks and energy loss.
  • Energy efficient appliances. High-efficiency appliances, such as refrigerators, ovens and microwaves, play a large role in energy savings. When buying appliances, look for the Energy Guide label that contains energy efficiency information.
  • Energy efficient heating and cooling systems. High-efficiency furnaces, air conditioners and other HVAC systems are major contributors to overall home energy efficiency. Look for Energy Guide labels on these pieces of equipment with information on efficiency ratings and energy usage.

Benefits of an Energy Efficient Home

  • Reduced greenhouse gas emissions. An energy efficient home can significantly reduce greenhouse gas emissions. This type of energy efficiency has long been a goal for California, and an energy efficient home can make a contribution.
  • Reduced energy usage. Energy efficient appliances, HVAC systems, and household equipment, along with tight home envelopes, will substantially decrease monthly energy usage. This will reduce stress on local electricity producers and contribute to an improved environment in your neighborhood.
  • Dramatic monthly cash savings. An energy efficient home can save you thousands of dollars per year in heating, cooling and electricity costs. For example, high-efficiency HVAC systems can slash monthly heating and cooling costs by 30 to 50 percent or more.

If you want your new home to be as energy efficient as possible, contact Übermortage for help with an insured Cal-EEM + Grant Program loan for an energy efficient mortgage. We can help you get the best possible terms while taking advantage of additional benefits such as energy efficiency grants.


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