Energy Efficient Mortgages

What is an EEM?

House from the FrontAs the single largest housing expense after a mortgage payment, utility costs can have a direct impact on how large of a mortgage a homebuyer can afford. Buyers can save money on the cost of utilities by making energy efficient improvements to the home they are purchasing. New homebuyers or current homeowners can use FHA’s Energy Efficient Mortgage (EEM) to finance the cost of these improvements. FHA offers the Energy Efficient Mortgage Program to allow homebuyers to finance the purchase of a home—or refinance a homeowner’s current mortgage—and include the cost of the energy-saving, cost-effective improvements through a single mortgage. FHA’s EEM program recognizes the monthly utility cost savings when homebuyers make energy efficient improvements. Borrowers may use the EEM program to finance the cost of energy efficient improvements into their new mortgages, without the need to qualify for additional financing, because cost-effective energy improvements result in lower utility bills making more funds available for their mortgage payments.

How the Loan Works

A Home Energy Rating System provider will complete a measurement of the home’s energy efficiency and provide a report listing recommended cost effective energy improvements, an estimated cost of the energy improvements, and estimated energy savings to the buyers and their lender. Buyers may finance the cost of the energy inspection report as part of the mortgage if the entire package, including these fees, is cost-effective. The amount of the energy efficient improvements is placed in an escrow account and released after an inspection verifies that the improvements are installed and the energy savings will be achieved. Buyers can begin making energy improvements after the loan’s closing, and the work must be completed within 90 days.


Almost anyone who has satisfactory credit, enough cash to close the loan, and sufficient steady income to make monthly mortgage payments can be approved for a FHA-insured EEM loan. There is no upper age limit and no certain income level required. The following types of properties are eligible under the EEM program, including new construction or existing one- to four-unit single-family residences:

• Detached houses
• Townhouses
• Condominiums (certain restrictions apply)

Without EEMWith EEM
Loan Amount$160,000$160,000
Total Loan Amount160,000168,000
Interest Rate4.75%4.75%
Monthy Payment1,301.301,366.37
Average Utility Bills265.00135.00
Total Payments1,566.301,501.37
Monthly Savings$64.93
Yearly Savings$779.16

Sample EEM

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