Energy Efficient Mortgage

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An Energy Efficient Mortgage (also known as an energy-improvement mortgage) is used to finance a home that is either already energy-efficient (i.e., an Energy Star-Certified home) or an existing property that is need of energy improvements. This type of loan also allows a qualified borrower the opportunity for a larger mortgage than they might otherwise be eligible for and/or a lower mortgage rate.

 Whether you would like to purchase a new energy-efficient home or upgrade an existing one, a Fannie Mae Homestyle Energy Mortgage can provide helpful loan and refinance options. This type of EEM allows approved borrowers to buy an energy-efficient home or to pull cash out of their home’s equity access funds for a wide variety of energy-efficient projects—from repairs and upgrades to landscaping and more. Just as with a regular mortgage, there are monthly payments to the lender.

This type of loan can be used for energy-efficient improvements such as the following:

• Water efficiency devices
• Renewable energy sources such as solar panels, wind power devices and geothermal systems
• Storm surge barriers
• Foundation retrofitting for earthquakes
• Hazardous brush and tree removal in fire zones
• Retaining walls to address mud and water flows
• Weatherization for air sealing, insulation, windows, doors and more
• Radon remediation

While you may be paying more money upfront and in your monthly payments with a Homestyle Energy Mortgage, you may spend less annually on lower utility bills because of the energy-efficient improvements you’ve made. Plus, if you stay in your home long enough, you may be able to offset your initial investment through your energy savings over the years.

Also, if you've previously had a Property Assessed Clean Energy (PACE) loan, you might be able to repay it as part of a refinance with a Homestyle Energy Mortgage. You might also qualify for tax credits for certain improvements made to your home. (Please consult your tax advisor for more information.)

Pay off higher-interest energy-related improvement debt, including PACE loans

• No additional closing docs or disclosures required
• Get a mortgage loan for up to 115% of the future appraised value of your home

This EEM program follows standard FNMA guidelines and includes the following loan requirements:

Renovation of existing property to make energy-related improvements

• For purchase or limited cash-out refinance transactions
• Up to 15% of the “as-completed” appraised value of the property

Payoff of existing PACE loan

• For purchases or limited cash-out refinance transactions
• Pay off higher-interest energy related improvement debt including PACE loans
• All outstanding PACE debt may be paid off up to the maximum allowable LTV for the transaction and occupancy type

Payoff of non-PACE secured or unsecured debt that financed energy related improvements

• For limited cash-out refinance transactions
• Up to 15% of appraised value of the property

Financing Options

• Various Fannie Mae fixed rate loan options available
• Purchase and Limited Cash-Out Refinance transactions permitted
• High balance permitted

Property Improvements

• Can be for water efficiency, renewable energy, radon remediation, resiliency and energy repairs
• Up to $3,500 in weatherization items allowed with no energy report
• No minimum dollar cap for improvements and the maximum dollar amount will be determined by the type of EEM financing option
• No additional disclosures or closing docs required
• Must be completed within 180 days of the date of the mortgage note
• Can be used in conjunction with Homestyle Renovation for energy-related improvements that exceed the EEM allowable

A variety of property types are supported with a Homestyle Energy Mortgage:

• 1-4 unit principal residence
• 1-unit second home
• 1-unit investment property
• New or existing properties
• Manufactured homes
• Condos, co-ops and PUDs

As a Fannie Mae approved lender, New American Funding offers fixed 15- or 30-year fixed-rate mortgages for purchasing, limited cash-out refinancing and high balances.

An Energy Efficient loan can help you meet your energy efficiency needs, enhance the value of your home and save you money on utility costs. To find out more, contact a trusted New American Funding Loan officer today!

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