May 1, 2014
A reader asks, “Can an FHA EEM loan be a stand alone or does it need to be a part of a purchase money loan or a refinance loan?”
The FHA Energy Efficient Mortgage program allows a borrower to add money to a new purchase home loan or an FHA refinance loan–money that is intended to be used for approved energy efficient upgrades to the home.
The rules governing FHA EEM loans are found in HUD 4155.1 Chapter Six Section D, which states in part:
“New and existing one to four unit properties, including one unit condominiums and manufactured housing properties, are eligible for the Energy Efficient Mortgage (EEM) Program. EEMs may be used for both purchases and refinances, including streamline refinances, with
• Section 203(b)
• Section 203(k) rehabilitation loans
• Section 234(c) units in FHA-approved condominium projects, and
• 203(h) mortgages for disaster victims”
This section says nothing about a borrower being permitted to apply for an EEM without either a new purchase loan or a refinancing loan so it may be safe to assume that the FHA EEM option is only for use in conjunction with the new purchase or refinance loan packages.
The next portion of Chapter Six Section D seems to reinforce this idea:
“The EEM is initially underwritten as if the energy package did not exist, using standard FHA underwriting guidelines, qualifying income ratios, and maximum mortgage/minimum downpayment requirements, without regard to the energy package.”
That allows the borrower to qualify for the loan without the added dollar amount of the EEM, which could provide an advantage to some borrowers who need credit but might have a more difficult time qualifying for the higher amount of the loan with the cost of EEM features included.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: