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Green Mortgages | What is a Green Mortgage?

Posted by Penny Hull on Mon, Jan 31, 2011 @ 06:01 AM

What is a Green Mortgage, and How Does it Work?

How Green Mortgages Help You Buy a More Energy Efficient Home 

Green Mortgages | How Does a Green Mortgage WorkGreen mortgages are based on the principle that a more energy-efficient home means lower utility bills, with more income left over – qualifying a prospective homeowner to buy a more expensive house. 

A green mortgage provides you a bigger loan than normally permitted, as a reward for making energy-efficient improvements or buying a home that meets particular energy-efficiency standards

Borrowers can finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans.  

Here’s how Green Mortgages work: 

Energy Efficient Mortgages (EEMs) are used to purchase a new home that is already energy efficient. Energy Improvement Mortgages (EIMs) are used to purchase existing homes that will have energy efficiency improvements made to them.

EEMs (and EIMs) are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac).

Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs. These mortgages allow home buyers to add as much as an additional 15 percent of the sale price into the loan, for upgrades such as energy-efficient windows, water heaters, or solar panels. The savings in energy bills offsets the higher monthly mortgage payments, creating more savings over time.

How can you qualify for an energy efficient mortgage?

For a newly constructed home – the home must be certified by the builder that the home was designed and built to meet energy efficiency guidelines (usually through a third party inspection process). 

A home energy rater can also inspect the home and issue a Home Energy Rating System (HERS) report certify that the house is energy-efficient.   A HERS rating usually costs between $300 and $800. This could be paid for by the buyer, seller, lender, or real estate agent. Sometimes the cost of the rating may be financed as part of the mortgage.

This report is used by the lender to increase the borrower's income by a dollar amount equal to the estimated energy savings.  These programs also allow for higher debt ratios because of the presumed energy savings. 

The energy savings will translate into higher value from the property as seen in an appraisal/market value.  Having a HERS report will increase the value of a home. 

Homeowners will also be able to take advantage of the Energy Policy Act soon, which gives tax credits to consumers who conserve energy.

By the way, green mortgages have a lot to offer. But the concept is not new. Major lenders backed by Fannie, Freedie and the VA have financed green mortgages (currently promoted under the Energy Star Program) since 1970.

Information courtesy guest author Brian Laible at Primary Residential Mortgage.  Call Brian at 919-256-3133 for more information about Green Mortgages.

Ask the Financing Expert Series

Stanton Homes continues to offer the information you're looking for.  Other popular questions include:

If Interest Rates Go Up, How Will My Buying Power Change?

Construction Loans - What Kind of Down Payment is Required?

How Do Construction Loans Work?

Check back for more construction home loan and other financing questions from our new "Ask the Expert" column, featuring Brian Laible, Senior Loan Officer for Primary Residential Mortgage. 

Send us YOUR questions to "Ask Brian", and look to Stanton Homes for the answers you need.

sBrian Laible - Ask Brian!

Sr. Loan Officer, Primary Residential Mortgage

701 Exposition Place, Suite 118, Raleigh, North Carolina 27615

919.256.3133

 

ecoSelect Third Party Energy Certification –

The ecoSelect certification in your new home indicates that the construction is designed to provide higher levels of energy efficiency, per the national HERS index, with better indoor air quality and water efficiency than standard new homes.  We're not afraid to have third party inspectors check our homes carefully, for your piece of mind and long term value.  Learn more about new homes with lower energy costs, here.

 

*Stanton Homes is not a lender, not offering lending advice, and is not affiliated with Primary Residential Mortgage.  For answers to lending questions, contact a trusted lender.

Tags: construction loans, ask brian, ask the financing expert series, will interest rates go up, construction to permanent, green mortgage, energy efficient mortgage

If Interest Rates Go Up, How Will My Buying Power Change?

Posted by Penny Hull on Wed, Dec 22, 2010 @ 07:12 AM

How Increasing Interest Rates Affect Monthly Payments

What Interest Rate Increases do to the Home Loan Value You Can Afford

Life has been extremely busy in the mortgage industry these past few months.  People waiting for the bottom of the interest rate market probably have missed the mark as rates moved up rapidly late last month.  Rates are driven by the sale of Mortgage Backed Securities on the open market, and continue to be very volatile in nature.

From a historical standpoint, rates are still extremely low. If past performance is any indicator, we could be in for a swing in a much higher direction. If you purchased a home in 1981 for example, you paid 16% interest for a 30 year fixed.  At that point in U.S. history, the country's inflation rate was running in double digits and the cost of borrowing money reflected this fact.

Our current mortgage rates have actually stayed artificially low, as our government has bought its own debt.  These low interest rates can change very rapidly, as we watched in November when there was  a swing of .5% in a matter of a week.  This rapid change is indicative of the way rates will move these days, as investors know the volatility of our economy and our debt.  In simple terms, no one wants to be the last one holding on to an investment at 4.75% when the market swings to 8%-10%+.

Just a one percent change in interest rates makes a big difference in what you can afford.  

What Happens to My Buying Power when Interest Rates Rise? | Construction Loans

With a 30 year mortgage on a $350,000 home at 5%, your principle and interest payment will be $1878.  The same home at a 6% rate will have a principle and interest payment of $2098 per month, and again the exact same home at an 8% rate will have a principle and interest payment of $2568 per month.

What Happens to My Buying Power when Interest Rates Rise? | Construction Loans

Let's look at the flip side of monthly payments.  If rates move to 6%, that same $1878 monthly payment will only allow you to qualify for a $313,000 home.  Rates tend to move up much faster than income.

What Happens to Buying Power When Interest Rates Go Up | Construction Loans 

Today’s market gives you the most historical buying power considering current rates and prices of homes.  If you are thinking of buying or building a home, this is the time to do it.  Housing prices have stabilized in most markets.  This means the bottom of the market is here.  Grab your best deals because there is nowhere but up from here. 

Source: Rate history HSHAssociates.com.  Payment amounts reflect principle and interest only.

Call Brian at 919-256-3133 for more information about loan qualifications and monthly payments at different interest rates.

Ask the Financing Expert Series

Stanton Homes continues to offer the information you're looking for.  Other popular questions include:

Construction Loans - What Kind of Down Payment is Required?

How Do Construction Loans Work?

Check back for more construction home loan and other financing questions from our new "Ask the Expert" column, featuring Brian Laible, Senior Loan Officer for Primary Residential Mortgage. 

Send us YOUR questions to "Ask Brian", and look to Stanton Homes for the answers you need.

sBrian Laible - Ask Brian!

Sr. Loan Officer, Primary Residential Mortgage

701 Exposition Place, Suite 118, Raleigh, North Carolina 27615

919.256.3133

*Stanton Homes is not a lender, not offering lending advice, and is not affiliated with Primary Residential Mortgage.  For answers to lending questions, contact a trusted lender.

Tags: construction loans, ask brian, ask the financing expert series, record low interest rates, what if interest rates go up, will interest rates go up