Wednesday, February 6, 2008

I keep hearing about “going green” … is there a benefit?

Indeed there are benefits to “going green” when buying or remodeling other than the obvious environmental relief. With utility costs rising, and technology improving, the utility savings are greater than ever before for such simple changes as proper insulation, high efficiency heating and cooling systems, etc. Of greater interest to most, however, are the interesting financing opportunities available for those taking green action including Energy Efficient Mortgages (EEM) and Future Value Financing (FVF) programs.

The EEM/FVF concept is based on the premise that a more energy efficient home will have lower utility bills. That savings can be considered income with these special loans, allowing a homebuyer to qualify for a bigger loan. Some interesting benefits of various loan programs include the possibility of: a. Minimum 2% stretch on the borrower’s debt to income ration plus one of the following – Lower interest rate, Discount on Closing costs and/or origination fees, Paying for the cost of the home energy rating,; b. Adding the cost of the energy efficiency improvements to the principal of the loan at no compromise in the loan-to-value ratio … you can finance 100% of the improvements without increasing your down payment.

There are ways you can finance the energy efficiency improvements to be completed after the close of escrow and enjoy the benefit of an EEM. In such situations you can also enjoy the benefit of FVF, where the home is appraised at the Future Value it will have after you complete your improvements … before you do the work.

Our Advice: If you can’t quite qualify for your desired home this might help you qualify for more house so you can buy the home you really want. With the recognized utility savings being available for mortgage payments, and the Future Value of the home being used as the appraised value, this might just be the answer to your situation. This not only applies to new homes, but can be implemented on resales or when you refinance your existing home. You can have a HERS (Home Energy Rating System) report done for $150-400. That report will tell you the energy efficiency status of your home and provide you with a list of things you can do to improve its energy efficiency. The HERS report is required for receiving green mortgage benefits. The Nevada Legislature came very close to passing a law requiring every home to have a HERS report on transfer so be advised that this topic is not as far out as it sounds at first blush. In fact, its simplicity and many benefits make it a “far out” program. Cool.

Green mortgage programs can be more complicated to explain than common loan programs, but don’t let that deter you from investigating its potential for you. The right lender and real estate agent can walk you through the process. We thank our associate, Dick McCole, for his contribution on this subject. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, or , 775-781-5472.

No comments: