Question: I bought a home in the mid 90´s using a 203(k) FHA Home Rehabilitation Loan for improvements. Prices have gone up tremendously since then and the mortgage amount for my new home is too high to qualify for the current 203(k) maximum loan limit. I´d like to make energy saving upgrades and was wondering if there is some kind of loan to cover these types of improvements that would be available to me now.

Answer: You are in luck. An Energy Efficient Mortgage (EEM) is easy to use, federally recognized and can be applied to most home mortgages. Cost effective energy saving measures may be financed as part of your mortgage for a buyer, like you, who wants to make improvements. Even though your monthly mortgage payments will increase a little, you actually save money because your monthly utility bills will decrease.

The process is simple. You find the home you want to upgrade and then tell your lender. A HERS (Home Energy Rating Systems) report, is prepared by a trained Energy Rater. The cost ranges from $100 to $300. Factors such as insulation, appliance efficiencies, window types, local climate and utility rates are used to rate the home and calculate energy costs. The report includes the overall rating of the home as it is, recommended cost effective energy upgrades, estimates of the cost, annual savings and useful life of upgrades and the estimated annual total energy cost for the existing home before and after upgrades. If the home qualifies for energy improvements, the lender will put extra funds to pay for these improvements into an escrow "holdback" account. Escrow closes, you move in and make the improvements.

In addition, an EEM can increase buying power by stretching dept-to-income qualifying ratios on loans for a buyer who is purchasing an already energy efficient home. Sellers benefit, too, if they have made upgrades because they offer a home that is more affordable due to energy efficient savings and the home will attract more attention in a competitive market.

For more information on EMMs, check out the website at http://www.myenergyloan.com.