Monday, November 3, 2008

Go Green Team, Part 3

If a property has green options that increase the energy effiency of the home, the buyer might consider looking into the option of energy efficient financing. Also, if buyer is putting into place systems that will further increase the efficiency of the property, it is possible to include the cost of these upgrades in the mortgage without increasing their down payment.

Many buyers are unaware of the existence of energy efficient financing options. There are a number of banks and private mortgage lenders that offer these options. Locally, there are banks that have policies in place for energy efficient mortgages. Fannie Mae, Freddie Mac and FHA also offer energy efficient mortgage options. Energy Star has a special mortgage option, and you can see a list of partner banks on their website.

FHA's energy efficient mortgage program has historically been the most widely used. It allows homeowners to roll the cost of energy efficient upgrades into their mortgage. The total cost of these upgrades cannot exceed 5% of the total loan value and they must be between $4000 and $8000.

Energy efficient mortgages can offer other benefits for buyers as well. If a home already has energy efficient systems in place, it can result in a lender offering a different interest rate, lower closing costs, or a different debt to income ratio requirement. The rationale behind this is that buyers will be spending less than the average amount on utility costs, freeing additional income for the mortgage payment. This type of financing will require the home to be certified in some manner (please see Go Green Team Part 2 for information on green home certifications).

Improving energy efficiency is not only good for the environment, but it can benefit the pocketbook as well.

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