Articles in Category: Energy Efficient Mortgage

November 3, 2015

FHA EEM “Stretch Ratios” For Existing Construction Loans

In our last blog post we discussed a new partnership between the FHA/HUD and the Department of Energy which is allowing eligible borrowers to get access to increased “stretch ratios’ under FHA energy efficient mortgages in 2016. According to an FHA press release, “FHAs existing EEH policy allows stretch ratios for homes that are built or retrofitted to the 2000 International Energy Conservation Code (IECC). For standard FHA loans, debt-to-income (DTI) ratios are limited to 31 percent (front-end) and 43 percent (back-end).” How do these ratios “stretch”? According to the press release, “Under FHA policy for the EEH mortgage, these DTI ratios can be increased to 33 percent and 45 percentrespectively. To increase opportunities for homeowners to achieve and benefit from an energy efficient home, FHA is adding a new | more...

November 3, 2015

FHA Energy Efficient Mortgages: New Standards For 2016

By Joe Wallace

In 2016, FHA borrowers looking to add Energy Efficient Mortgage loans to their transaction will have some new standards to use related to the energy efficient improvements they wish to add. Thanks to a new partnership between the FHA, HUD, and the Department of Energy, certain ratios will be increased in 2016, according to a press release found at the FHA official site. “FHAs existing EEH policy allows stretch ratios for homes that are built or retrofitted to the 2000 International Energy Conservation Code (IECC). For standard FHA loans, debt-to-income (DTI) ratios are limited to 31 percent (front-end) and 43 percent (back-end).” “Under FHA policy for the EEH mortgage, these DTI ratios can be increased to 33 percent and 45 percent respectively. To increase opportunities for homeowners to achieve and | more...

September 9, 2015

Energy Efficient Mortgages And Updated FHA/HUD Rules

By Joe Wallace

In a recent blog post we discussed the pending release of HUD 4000.1, which is the new FHA single family home loan policy handbook. Among the changes and updates to take effect on September 14, 2015 when the handbook is launched, there are some guidelines about FHA Energy Efficient Mortgages (EEM) and the financing of non-EEM energy efficient upgrades/improvements. One area we didn’t cover in our last blog post about the EEM issue is the dollar amount limit for these upgrades. How much does the FHA allow the borrower to finance for such improvements? According to the FHA official site, which has a FAQ section on the most common questions about new rules and updates that will be part of HUD 4000.1, we learn the following about the dollar amount | more...

April 24, 2015

FHA Refinance Loans For Investment Property? A Reader Question

By Joe Wallace

A reader asks, “I have rental property with a mortgage balance of $26000. The property shows a current value of $98900. I would like to refinance but seem to have a problem getting it refinanced? What would you advise me to do in order to utilize my equity to finance another investment.” The scope of this blog is FHA single-family home loans, and we answer questions about FHA loans with that scope in mind. Non-FHA loan related questions that deal with general finance topics may or may not be outside our range of topics. The reader question above may have been submitted under a mistaken assumption that the FHA single family home loan program might include refinance loans (which it does) for investment properties or other non owner-occupied residences (which | more...

May 1, 2014

FHA Energy Efficient Mortgage Loans: A Reader Question

By Joe Wallace

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 | more...

March 4, 2014

FHA Energy Efficient Mortgages

By Joe Wallace

There is an option for FHA new purchase home loans and refinancing loans called the Energy Efficient Mortgage (EEM). According to the FHA loan rules found in HUD 4155.1, “Under the EEM Program, a borrower can finance 100% of the cost of eligible energy efficient improvements into the mortgage, subject to certain dollar limitations, without an appraisal of the energy efficient improvements. For the EEM Program, the mortgage amount includes the cost of the energy efficient improvements, in addition to the usual mortgage amount normally permitted FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements energy efficient improvements must be cost effective in order to be included into the mortgage, and amount of the cost effective energy package is added to | more...

January 13, 2014

The FHA Energy Efficient Mortgage Loan

By Joe Wallace

The FHA loan program includes something called an Energy Efficient Mortgage. This program allows the borrower to apply for additional funds in order to make approved energy efficient upgrades to the property to be purchased with an FHA home loan. According to the FHA loan rules in HUD 4155.1 Chapter Six, Section D, the FHA EEM program allows the borrower to finance “100% of the cost of eligible energy efficient improvements into the mortgage, subject to certain dollar limitations, without an appraisal of the energy efficient improvements.” For the EEM Program, Chapter Six Section D says: mortgage amount includes the cost of the energy efficient improvements, in addition to the usual mortgage amount normally permitted FHA maximum loan limit for the area may be exceeded by the cost of the | more...

July 10, 2013

FHA Loan Answers: Can I Add Appraiser-Required Repairs/Improvements Into My FHA Loan?

By Joe Wallace

When you want to purchase a home with an FHA mortgage, one of the most important steps after choosing the property is the appraisal. An appraisal is required in order to establish the fair market value of the home and to make sure the home lives up to FHA minimum property standards. Appraisals may result in some required improvements, corrections or alterations to the home in order to bring it up to minimum standards. In such cases, the appraiser may make FHA loan approval conditional upon the completion of these changes and require a compliance inspection to make sure the fixes or alterations now bring the home up to standard. In such cases, is the borrower permitted to include the cost of this work in the sales price of the | more...

February 6, 2013

FHA Loan Rule Changes

By Joe Wallace

The FHA has issued several rule changes recently including alterations to the FHA HECM and HECM Saver programs, new guidelines for mortgage insurance, and also the procedures for how some FHA loan applications must be processed with credit scores and debt-to-income ratios that exceed certain new guidelines. For example, FHA refinance loans for borrowers with negative equity in their homes have new guidelines which state, “Refinances of Borrowers in Negative Equity Position where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually underwritten.” The same is true in cases of FHA Energy Efficient Mortgages. New FHA rules state, “While Energy Efficient Mortgages where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually | more...

October 31, 2012

FHA Energy Efficient Mortgages: Is Escrow Required?

By Joe Wallace

When learning abo0ut FHA home loans, escrow is one issue some borrowers have questions about. The FHA frequently asked questions pages include the following about escrow, which is governed by something called the Real Estate Settlement Procedures Act or RESPA: “Does RESPA require borrowers to maintain an escrow account? NO. It is the lender’s decision whether the borrower must maintain an escrow account for the purpose of paying taxes and other items. The HUD regulations only limit the maximum amount that a lender can require a borrower to maintain in an account.” That Q&A from the FHA official site seems to indicate that the FHA does not require escrow; indeed, it is the lender’s choice to require escrow or not. But are there situations where an escrow account may actually | more...