The Home Buyer's Korner

Information presented should be used for educational purposes only.

January 27th, 2017

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VAVA loans are known for the many benefits offered, one of which is the 100% financing available for eligible borrowers. However, whether purchasing a home or refinancing, you can also take advantage of improving a home with a VA Loan Energy Efficient Mortgage (EEM). With a VA EEM, the cost to upgrade the energy efficiency of the home can be financed as part of the mortgage. The VA EEM, along with other VA loans, can be obtained by a reputable VA mortgage lender

With the EEM program, the VA mortgage can be increased by $3,000 based solely on the documented costs, and up to $6,000 as long as the increase in monthly mortgage payment is not more than the reduction in monthly utility bills associated with the upgrade. Any costs above $6,000 must receive a VA determination. If the veteran performs the work, only the cost of materials will be considered. Here are additional VA EEM guidelines:

VA Energy Efficient Mortgages can be used to: Purchase a home, as well as, make improvements to the energy efficiency of the property. Refinance an existing VA loan through the Interest Rate Reduction Refinance Loan program and include energy efficiency improvements. IRRRL EEM cannot go over $6,000.

A VA EEM is not available without a VA home purchase loan or VA refinance and the decision to use an EEM must be made prior to closing the mortgage.

Some Acceptable Energy-Efficient Modifications are but not limited to:

Solar heating and cooling systems

Caulking and weather stripping


Permanent air conditioning units

Water Heater

Clock thermostats

Ceiling, attic and floor insulation

(new or additional) Insulation for water heater

Windows and doors

Heat pumps

Vapor barriers

Unacceptable Energy Efficient Improvements~Any improvement that is not permanent to the property is not considered acceptable to EEM program, such as:

Window air conditioner units

Appliances such as stove, refrigerator, washer and dryer

Any energy improvement that can be taken upon sale of the property, does not qualify.

When energy efficient improvements are not made prior to closing the VA EEM, an escrow account will be established with the amount of money needed to complete the improvements. The work must be completed within six months of the closing date of the loan. An inspection or written statement by contractor and or homeowner may be required upon completion to release funds. Any unused funds will be credited back to the principal amount of the mortgage. Borrowers who choose a VA energy efficient mortgage have the benefit of making an older, less energy efficient home a more comfortable place to live that is also affordable due to savings realized each month on utility expenses. In addition, the energy upgrades to the home will increase the resale value when selling the property. In a competitive market, energy efficient homes often tend to attract more buyers and result in quicker sales.


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The Conventional Alternative to FHA 203K

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