Energy efficient mortgages for VA loans will become more popular as people find out about them.
If you are some sort of Veteran, VA loans can be an excellent way to purchase your new home. What is great is that if you are buying a home that could be upgraded in regards to energy savers, you can certainly do this with your VA loan. It is called a VA energy efficient mortgages. Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEM’s. And the Veterans Administration added this to their arsenal of VA loans.
Energy efficient loans can be very effective, unless you are having an energy efficient home built. If you have an older home, it probably won’t be up to current standards, which could cost you hundreds of dollars monthly.
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Explaining how Energy Efficient Mortgages work for VA loans?
On Va loans, it can be increased up to $6,000 in energy costs without the approval by the VA, as long as the lender thinks the improvements are reasonable. If the costs are over $6,000, it must be supported by an increased valuation in an equal amount. Here are the different levels of increases.
Directly from the VA handbook, the mortgage may be increased :
- up to $3,000 based solely on the documented costs
- up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or
- more than $6,000 subject to a value determination by the VA.
The buyer may wish to contact a person or a firm to show such energy improvements. As I mentioned in my FHA post, you can also contact your local utility company for these services.
Acceptable energy efficient improvements, but are not limited to :
- solar heating and cooling systems
- caulking and weather stripping
- furnace efficiency modifications limited to replacing burners, boilers, or furnaces designed to reduce the firing rate or to achieve a reduction in the amount of fuel consumed as a result of increased combustion efficiency, devices for modifying flue openings which will increase the efficiency of the heating system, and electrical or mechanical furnace ignition systems which replace standing gas pilot lights
- clock thermostats
- new or additional ceiling, attic, wall and floor insulation
- water heater insulation
- storm windows and or doors, including thermal windows and or doors
- heat pumps
- vapor barriers
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Reminder : There are special and certain tax credits both nationally and locally. For tax purposes, there is a $1,500 tax credit until the end of the year. Not sure if the government is going to extend this. There are also state credits and sometimes credits given by your utility companies. Just be careful though, because sometimes you have to use those they recommend when doing the energy inspection report.
Keep in mind, the VA energy efficient loans are a little different than FHA energy efficient loans when calculating what the amount of energy costs that are allowed to be financed. And these EEM’s for VA loans can be used for both purchasing a new home or refinancing your current home.
Please consult Part 1 for the chart, giving you an idea of your monthly savings if you add $6,000 of costs onto your mortgage regarding the energy efficient mortgages.
Energy Efficient Mortgage Series
Energy Efficient Mortgages – EEM loans – Part 1 of 2 – FHA loans going ‘Green’
Energy Efficient Mortgages – EEM loans – Part 2 of 2 – VA loans going ‘Green’
Source: zillow.com