FHA’s Energy Efficient Mortgage (EEM) Program


Did you know that the federal government can help you make energy improvements to your home? If you’ve considered remodeling, take the time to learn more about the FHA’s Energy Efficient Mortgage (EEM) Program. You might qualify for a higher loan amount to fund energy improvements that will lower your living expenses.

If your cost of living is being hit hard by rising gasoline prices, you’re not alone. Everyone’s feeling the squeeze. One way to reduce your spending is to cut the cost of your utility bills. And replacing those drafty windows and leaky ducts might be easier than you think.

Energy Efficient Mortgage (EEM)

An EEM funds the costs of planned energy-efficiency improvements to your home. They can be federally insured through the Federal Housing Authority (FHA) or Veteran’s Administration (VA). They may also be made without federal backing, either through conventional channels, or through an Environmental Protection Agency (EPA) program called ENERGY STAR. Each of these channels has slightly different terms and qualification requirements.

Qualified energy upgrades

Common upgrades include ductwork and insulation repairs, and installation of modernized heating and air conditioning systems, energy-efficient windows, and/or energy-efficient water heaters.

All EEM programs require that the financed energy upgrades result in utility cost savings over time. The potential savings must be documented by a Home Energy Rating Systems (HERS) report. A HERS report rates your home’s energy efficiency before any upgrades, and then prepares a cost/benefit analysis on potential upgrades. Qualifying upgrades are those whose estimated costs of implementation are less than the resulting savings. Upgrades costing more than the total savings they can provide are not recommended.

Benefits of EEMs

Because EEM lenders allow additional funding for the cost of the energy upgrades, you’ll qualify for a larger loan amount. Your lender may recognize that your cost of living will be lower after the planned upgrades, which should also increase your borrowing power. If you qualify for an FHA- or VA-backed EEM, you’ll likely have access to better rates and terms. Lastly, the EEM will give you the resources necessary to increase the value of your home and enhance your quality of life.

Taking action

The steps to acquiring an EEM refinance are very similar to applying for a conventional loan. Start by shopping around, letting prospective lenders know that you’re considering an EEM. An experienced lender can offer advice as to which program would be most appropriate for your situation. You’ll also need to order a HERS report as soon as possible; this will indicate which upgrades qualify for financing.

The sooner you get the ball rolling, the sooner you’ll realize the benefits. Who knows…you may actually catch the energy-efficient bug and trade in that gas-guzzler for a hybrid.


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