VA Program
Wondering whether an Energy Efficient Mortgage is right for you? There are a lot of options when it comes to the VA loan, and an EEM is just one of the many ways to maximize your hard-earned benefit.
How to Get a VA EEM
Energy Efficient Mortgage (EEM)
Energy Efficient Mortgages are an excellent option to pay for qualified improvements to increase a home’s energy efficiency and save money on utility bills. EEM homes can provide increased protection against heat, cold, pollution and moisture, and are also great at reducing your carbon footprint.
What is a VA Energy Efficient Mortgage?
An Energy Efficient Mortgage, or EEM, is a loan program available through the VA which helps Veterans finance qualified energy efficiency-related home improvements.
Types of VA Loan Energy Efficient Improvements
A VA EEM is a great way to finance improvements for your home, especially when used in conjunction with other VA loan products like a streamline refinance.
There are many updates you are eligible to make with the VA EEM, including:
Eligible VA EEM Home Improvements
- Solar water heater
- Solar panels
- Weatherproofing
- Modifying furnace efficiency
- New insulation
- Storm doors or windows
- Installing a solar water heater or insulating the current one
- Adding solar panels
- Weatherproofing additions such as caulk
- Modifying furnace efficiency
- Adding new insulation to walls, the ceiling, etc.
- Installing a storm door or windows
VA EEM Improvements typically need to be considered permanent to the property. Window air conditioning units wouldn't be considered permanent, and adding central air conditioning to a home wouldn't likely increase a home's energy efficiency.
Ineligible updates can include:
Ineligible VA EEM Home Improvements
- A/C units
- Vinyl sidingg
- Energy Star-rated appliances
- New roof or shingles
- Energy Star-rated appliances
- A/C units
- Vinyl siding
- New roof or shingles
Pros and Cons of a VA Energy Efficient Mortgage
There are many benefits to making energy-efficient updates, especially through the VA. Even though you’ll reap the benefits of savings in future years, it is important to recognize the upfront costs of such updates.
PROS
- Added comfort in all seasons
- Reduced noise and pollution
- Overall improved health
- Potential resale value
CONS
- Borrowing more money to cover the cost of upgrades
- Spending limit of around $6,000 in most cases
- It may take years to fully recoup costs
3 Cost Tiers for EEMs
Improvements totaling
$0 – $3,000
This is the easiest tier to get approved.
You will generally need to provide a copy of a contractor bid or quote itemizing the costs, and you will need to provide manufacturer information for each product.
Improvements totaling
$3,001 – $6,000
In addition to the information required in the first tier, you'll also have to obtain an energy audit showing a year's worth of utility cost averages for the home.
These documents will then be reviewed to determine if the proposed EEM improvements will significantly impact the utilities to be cost-effective.
Improvements totaling
$6,001 and up
It's challenging to obtain an EEM greater than $6,000.
Requests for this tier have to be approved by the lender and the VA. In addition, it's important to understand that financing the cost of acceptable energy efficiency improvements cannot count toward meeting the minimum loan amount necessary for VA loans utilizing second-tier entitlement.
The Veteran typically has six months after closing to have the VA energy efficiency improvements completed. Small fixes can be taken care of before closing. Otherwise, the lender may decide to open an escrow account for the improvement funding.
More info about VA Energy Efficient Mortgage
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