November 5, 2015
Recently we reported on the FHA’s coming rule modification for the Energy Efficient Mortgage program. For loans in 2016 with FHA case numbers assigned on or after January 25, 2016, homes with qualifying energy ratios could be eligible for increased “stretch ratios” as described below (reprinted from 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 benefit from an energy efficient home, FHA is adding a new threshold for existing construction homes based on the Home Energy Score scale…”
Homes must, among other things, score a “6” on a Home Energy Score Scale. According to FHA Mortgagee Letter 2015-22, “The Home Energy Score Report includes a detailed analysis of the homes energy profile including the Home Energy Score, Home Facts, and Recommendations.”
“The Home Energy Score reflects the energy efficiency of a home based on the homes structure and heating, cooling, and hot water systems. The Home Facts provide details about the current structure and systems, as well as the annual estimated energy use of the home. Recommendations show how to improve the energy efficiency of the home to achieve a higher score and save money.”
FHA loan rules for the Home Energy Score process include a requirement that the score be completed by a trained professional. “A Home Energy Score must be completed by a qualified Home Energy Score Assessor using the Home Energy Scoring Tool.”
The Mortgagee Letter says in order to create an official Department Of Energy recognized Home Energy Score, the Assessor must “collect and submit a standard set of data inputs regarding the energy related features of a home, including but not limited to its heating, cooling, and hot water systems, as well as its structural envelope…”
This program is available for both purchase and refinance loans. According to the FHA, “Borrowers may purchase or refinance a home utilizing any Title II Single Family forward mortgage program. FHAs Weatherization program may also be used…” Borrowers must pay appropriate fees for services rendered to get the Home Energy Score, and FHA does not set or regulate those fees.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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.
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