FHA Energy Efficient Mortgages

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FHA energy efficient mortgages are special loans that are backed by the Federal Housing Administration to encourage the construction and purchase of homes that utilize less energy in day-to-day functioning.

 The purpose of energy efficient mortgages

 FHA energy efficient mortgages are designed to do several things. These include:

  • Enable the purchase of energy efficient homes -- FHA energy efficient mortgages are available for those who are in the market to buy energy efficient homes or make such improvements to them at the time of purchase.

  • Refinance homes to make improvements -- FHA energy efficient mortgages can also be used to refinance existing home loans so energy efficient improvements can be made to a property.

Who funds FHA energy efficient mortgages?

FHA energy efficient mortgages work like other government-backed loans. This means a borrower must go through an approved mortgage lender who will underwrite the loan. The FHA simply insures it.

Qualifications for FHA energy efficient mortgages

There are a number of qualifications that must come into play for people to be eligible for FHA energy efficient mortgages. They include:

  • Regular qualifications -- Buyers must qualify for standard FHA-backed loans to obtain this type of mortgage.

  • Cost effectiveness of the improvements -- FHA energy efficient mortgages are designed to make minor to moderate improvements. The cost of improvements cannot exceed 5 percent of the property’s value.

  • Size of the property -- FHA energy efficient mortgages are available for properties that are one to four units in size.