Purchasing a home with the right level of energy efficiency can be a difficult task. Without the energy efficiency ratings shown on the home listings, you could drive yourself crazy trying to find a home that does not create a large carbon footprint on the Earth. Does this mean that you have to keep searching until you find the home that fits your energy efficiency needs? Luckily, if you are a veteran and have an entitlement to a VA loan, you do not have to do that – you can purchase the home that has the layout and design that you love while still obtaining the money to make the energy efficiency changes that you want. It’s called the VA Energy Efficiency Mortgage Loan Program and it offers a large number of benefits for our veterans.
How to Qualify for VA EEM loan program
The VA EEM loan program enables veterans to obtain a standard VA loan, which means a loan with no down payment and easy to qualify for guidelines and to add to it the energy efficiency changes that they desire. The standard guidelines for a VA loan are as follows:
- Minimum credit score of 620 in most cases, although the VA does not have a required minimum, this is the number most lenders require
- At least 2 trade lines reporting on your credit report unless you will be using alternative credit, such as utility payments or rent payments
- No more than one late housing payment in the last 12 months
- No outstanding collections
- At least 2 years must have passed since the discharge of a bankruptcy
- No federal liens
- At least 3 years must have passed since a foreclosure
- All child support payments must be current
- Debt ratios that do not exceed 29/41
- Adequate residual income based on your area; the country is divided into 4 areas
- Income that is easily documented
- Certificate of Eligibility
If you meet the above requirements, of which the VA places the most emphasis on the amount of residual income, you can qualify for the loan. Remember, however, that every lender has their own requirements. You might find one lender that requires a 650 credit score, while another that is willing to take a 600 credit score as long as there are a few compensating factors, such as a high amount of residual income or stable income over the last few years.
Using the VA Energy Efficient Mortgage Loan Program
Once you know that you will qualify for a standard VA loan, you can add the benefit of the VA Energy Efficient Mortgage Loan Program. Essentially, this means you are taking the standard VA loan and financing the costs of the energy-efficient changes you wish to make on the home you purchase. Most borrowers are able to add up to $6,000 of changes onto their loan. There are a large variety of changes you can make to enhance the energy efficiency of the home, but the most common include replacing the windows/doors for energy efficient options; replacing the heating and cooling systems, and adding or replacing the insulation.
In order to determine the right changes and whether or not they are plausible, the lender will require an energy efficiency audit. This audit is completed by an energy efficiency professional that comes up with a score based on the Home Energy Rating System. Once the original score is tabulated, the auditor will come up with the changes that will have the most impact on the home, helping to lower its score and the impact the home has on the environment. The goal is to lower the score to the average new home energy efficiency rating of 100, as most existing homes average around 130 right now.
The changes you plan to make on the home after your purchase it must be completed within 6 months of the closing date. The lender will hold onto the money set aside for the changes and disburse the funds as the jobs are completed. This way the lender can ensure that the work is completed and the contractors completing the work are put on a strict timeframe to ensure that your energy efficiency changes are completed on time.
The changes you make to a home you purchase can provide you with monthly savings on your utility bills, help the environment, and even increase the resale value of your home. If you found a home that you love, but the energy efficiency is not up to par, consider the VA Energy Efficient Mortgage Loan Program to help you get the home you want with the efficiency you and the environment desire.
