Energy-efficient mortgages allow for more borrowing power, SAVE legislation could make them more accessible 2

If you are buying an energy efficient home, you may qualify to borrow more money thanks to loan programs that take into consideration the money you will save in energy costs when factoring your debt-to-income ratio.  These types of loans are called Energy Efficient Mortgages (EEM) and are insured by the Federal Housing Administration (FHA).

Michael Seward has earned the NAR Green designation. If you are looking to buy or sell an energy efficient home, call Michael Seward at 413-531-7129

Michael Seward has earned the NAR Green designation. If you are looking to buy or sell an energy efficient home, call Michael Seward at 413-531-7129 

In addition to using an EEM to qualify for a larger mortgage, it could also be used to finance energy savings upgrades when remodeling or buying a less energy efficient home.    When buying a less energy efficient home, an EEM could be combined with FHA’s 203 (k) loan―the Federal Housing Administration’s rehab loan.

To measure the energy efficiency of a home, a Home Energy Rating Systems (HERS) test must be performed by a professional energy rater.   Cities and towns in Massachusetts that have been designated as Green Communities as part of the commonwealth’s Green Communities Act have adopted a new building code, known as the Stretch Code, which requires new construction have HERS tests conducted.

The Center for Environmental Technology in Northampton can help with getting in touch with a HERS tester.  However, if you are buying new construction in a Green Community, there is a good chance that a HERS test was already conducted.  I say a good chance because the building permit could have been pulled before the town adopted the new building code that requires it.  So it makes sense for home buyers of new construction to find out if it was built with the Stretch Code as they may qualify for an EEM.

Of course, whether or not home buyers qualify for an EEM loans isn’t limited to new construction in towns that have adopted the Stretch Code, LEED® homes and Energy Star® homes would also qualify.

There is currently a bill in the Senate that would also require Fannie Mae, Freddie Mac, and FHA to make energy efficiency a factor in their underwriting policies as well.   The legislation is called the Sensible Accounting to Value Energy, or SAVE Act.    According to a recent article in The New York Times, the bill has bipartisan support.

The Times also reported that a study conducted by the Appraisal Institute found that there is a 32% risk that a loan will default on homes that meet Energy Star® guidelines.

Michael Seward is a member of the National Association of REALTORS® Green Resource Council.  If you are planning on buying or selling a home in the Pioneer Valley, make your first call to Michael Seward at 413-531-7129 or email:


  1. Michael
    EEMs are a great match for Western Mass. Do you know of any local banks offering them? I am a HERS rater in Northampton ( and would love to work with any lenders to help develope a program.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s