VA Energy Efficient Mortgage
A VA Energy Efficient Mortgage enables veterans and service members to upgrade their existing home with energy-efficient improvements or make such improvements to a new home during the purchasing process.
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- A VA Energy Efficient Mortgage, or EEM, enables veterans to make energy-efficient improvements to their homes.
- In most cases, an EEM allows for improvements that cost up to $6,000, though more may be available depending on your lender and the VA’s determination.
- An EEM can result in lower utility bills, more comfort, and potentially a higher resale value for your home.
The U.S. Department of Veterans Affairs encourages veterans to make home improvements that conserve energy, reduce water use, enhance safety, and strengthen disaster preparedness. One way the VA enables veterans to do this is through a VA Energy Efficient Mortgage, or EEM.
An EEM is a VA home loan that grants veterans and service members up to $6,000 for energy efficiency improvements to their homes. Between 2018 and 2022, 994 EEMs were awarded, totaling $4.3 million.
On This Page
- What is a VA Energy Efficient Mortgage?
- Types of Energy-Efficient Improvements Covered
- How the VA EEM Works
- Eligibility for VA Energy Efficient Mortgage
- Cost Tiers for VA Energy Efficient Mortgages
- Pros and Cons of a VA Energy Efficient Mortgage
- Additional VA Home Improvement Options
- FAQs About VA Energy Efficient Mortgages
- Get Started with Your VA EEM Today
What is a VA Energy Efficient Mortgage?
The purpose of the VA EEM is to finance energy-efficient improvements for veterans’ homes. With this type of VA home loan, there is no down payment, competitive interest rates, and your home’s energy efficiency will be improved, resulting in lower utility bills.
EEMs cover the cost of making energy efficiency improvements or upgrades to a home. They can be used in conjunction with a VA home loan to purchase a new home or with a VA refinancing loan on an existing home.
Veterans can use an EEM on an already energy-efficient home for up to $6,000 worth of upgrades if their home meets the Home Energy Rating Score standards. EEMs can also be used to purchase older homes that need energy improvements or to refinance current homes that need improvements.
Types of Energy-Efficient Improvements Covered
| Eligible Improvements | Ineligible Improvements |
|---|---|
| Solar water heaters and solar panels | Air conditioning, unless it improves energy efficiency |
| Insulation in walls, ceilings, attics, and water heaters | Energy Star-rated appliances |
| Weatherproofing, such as caulking and weather stripping | Pool installations or major structural changes |
| Furnace modifications and HVAC system upgrades | Vinyl siding or new roofs |
| Storm doors and energy-efficient windows | |
| Heat pumps | |
| Clock thermostats | |
| Vapor barriers |
| Eligible Improvements |
|---|
| Solar water heaters and solar panels |
| Insulation in walls, ceilings, attics, and water heaters |
| Weatherproofing, such as caulking and weather stripping |
| Furnace modifications and HVAC system upgrades |
| Storm doors and energy-efficient windows |
| Heat pumps |
| Clock thermostats |
| Vapor barriers |
| Ineligible Improvements |
|---|
| Air conditioning, unless it improves energy efficiency |
| Energy Star-rated appliances |
| Pool installations or major structural changes |
| Vinyl siding or new roofs |
How the VA EEM Works
A VA EEM combines the home’s purchase price and energy-efficient upgrades into one loan. A VA appraisal will determine the “as-completed” value based on improvements. Borrowers must provide contractor quotes, energy audits, and other necessary documentation to support their EEM application.
A loan for an existing property may be increased by up to $6,000 for energy improvements at any time up to loan closing without the VA’s prior approval. The lender must determine that the proposed weatherization or energy conservation improvements are reasonable for the property and evaluate the veteran’s ability to pay the increased loan payments.
For EE improvements that will increase a loan amount by over $6,000, the increase in the loan amount must result in an equally increased valuation.
Eligibility for VA Energy Efficient Mortgage
For veterans looking to make their home more energy efficient, the VA has the following eligibility requirements for an EEM:
- Basic Requirements:
- The borrower must meet the standard VA loan eligibility requirements.
- The home must be the borrower’s primary residence.
- HERS Index:
- The Home Energy Rating System, or HERS, may impact eligibility for an EEM loan depending on the current energy efficiency score of the home.
- The ideal HERS score is 100 for new homes and 130 for older homes.
Cost Tiers for VA Energy Efficient Mortgages
Mortgage increases from an EEM fall into the following improvement tiers:
- Up to $3,000: This increase is based solely on the documented costs. Veterans can get easier approval with contractor quotes.
- $3,001 – $6,000: Requires an energy audit and utility cost savings documentation. The monthly mortgage payment must not exceed the likely reduction in monthly utility costs.
- Interest Rate Reduction Refinance Loan, or IRRRL: Higher monthly mortgage payments may be required based on the cost of energy-efficient improvements. Veterans generally may not obtain cash proceeds from an IRRRL, except in cases where up to $6,000 can be used to reimburse them for the cost of energy improvements completed within 90 days from the date of the loan.
The completion times for the improvements vary as follows:
- Energy improvements financed through the VA EEM are usually completed after loan closing. An escrow account will be established at closing with the funds for energy improvements. After closing, the borrower will hire contractors to complete approved upgrades. Payments will be made from the escrow account. Any remaining funds after repairs are paid are either returned to the borrower or applied to the outstanding loan balance.
- The Veteran typically has six months after closing to have the VA energy efficiency improvements completed. Small fixes can be addressed before closing.
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Pros and Cons of a VA Energy Efficient Mortgage
| Pros | Cons |
|---|---|
| Reduced utility bills over time | Upfront costs for improvements. |
| No down payment required. | Spending limit of $6,000 for energy-efficient upgrades. |
| Improved comfort and health benefits from better insulation and air quality. | Time to recoup costs may take several years, depending on utility savings. |
| Potentially higher resale value. |
Additional VA Home Improvement Options
There are several other types of home improvement funding options available to veterans outside of an Energy Efficient Mortgage.
- VA Cash-Out Refinance: Refinancing your home allows you to tap into its equity for other home improvements.
- Specially Adapted Housing Grants: Special grants are available for disabled Veterans needing home modifications for accessibility.
- FHA 203(k) Loan: Non-VA FHA 203(k) loans are an alternative for more significant renovations not covered by the VA EEM.
FAQs About VA Energy Efficient Mortgages
Can I Use an EEM on an Existing Home or Only a New One?
You can use a VA EEM on an existing, outdated home that needs energy improvements or a new home that could benefit from energy efficiency upgrades.
Does The VA Cover Solar Panels?
The VA doesn’t pay for solar panels for veterans, but a VA EEM can help you make improvements like adding solar heating and cooling systems to your home.
How Do I Determine If My Home Qualifies For An EEM?
To qualify for an EEM, you must meet the VA’s mortgage requirements, and your home must be your primary residence. Additionally, your home’s HERS score, or current level of energy efficiency, will impact your eligibility.
What Energy Improvements Are Eligible Under The VA EEM?
With a VA EEM, you can make improvements like adding solar panels, insulation, weatherproofing, furnace modifications, storm doors, and more to your home.
Get Started with Your VA EEM Today
Despite the program’s benefits, VA Energy Efficient Mortgages are not widely offered by many lenders. However, a VA-approved lender can help you understand whether the program is available to you and how you can use an EEM to make energy-efficient upgrades to your home.
