VA loans are hands-down the best choice for those who qualify for this excellent zero down loan program. But there is a feature of certain VA loan programs that’s seldom used and that’s a shame. VA loans have competitive interest rates and no monthly mortgage insurance. Any other low down payment loan such as an FHA or conventional product will have slightly higher rates as well as a mortgage insurance premium payment. That adds up to quite a difference. But with an Energy Efficient Mortgage, or EEM, the overall payments related to home ownership will be lower still
Either with a purchase loan or when refinancing, veterans can roll into the loan amount funds needed to make energy efficient improvements to the home, up to $3,000 worth. When doing so, all you need to do is validate the EEM improvements made. This is typically done with cost estimates from a hardware store or a contractor. You can even do certain improvements yourself. If you want energy improvements greater than $3,000, VA loans make allowances for upgrades to $6,000. If you do in fact want more than $3,000, the VA lender will need to verify the additional improvements will in fact reduce your utility bills each month.
What improvements can be made? No, repairs to your hot tub don’t qualify, but others certainly do. You can install double-pane, thermal windows. New caulking throughout the house around doors and windows. You can insulate the attic and walls using the EEM. Those fancy new thermostats that control the temperature while you’re away at work or asleep at night? Those, too qualify as well as the labor it takes for installation. Upgrade the furnace or buy a new heat pump. If you’re not sure whether a specific energy improvement will be approved, simply ask your loan officer. Also ask what sort of documentation the VA lender will accept in order to document the improvements to be made. Doing so will lower your overall housing costs, making a VA loan an even better choice than it already is.