Profitable niche
Selling Green
Environmentally sensitive homes aren’t just for tree huggers any more.

(cont.)

How Energy-Efficient Mortgages Work

Houses that meet prescribed energy standards can qualify for favorable mortgage terms, ranging from higher borrowing limits with little or no downpayment to cash-back features. They can be used to purchase a new or existing home or to finance energy-related improvements. The FHA, VA, Fannie Mae, and Freddie Mac all sponsor energy-efficient mortgages (EEMs) for homes that are certified as energy efficient by an accredited energy rating system or independent consultant. These mortgages allow consumers to buy more home--either through a traditional 2 percent stretch, which adds energy savings to income to qualify buyers for 2 percent more debt, or through flexible loan-to-value ratios of up to 100 percent of home value. There are standard EEMs with no upper income restrictions and ones for borrowers who are at or below 100 percent of area median income.

Energy improvement mortgages allow buyers of older homes to roll the costs of making energy improvements right into the mortgage. An energy rater inspects the property and recommends cost-effective improvements—perhaps replacing electric baseboards with a forced air gas furnace or older aluminum single-pane windows with vinyl. The lender places the money for those improvements into an escrow account, and when they are made another energy rating is taken. If the work was performed satisfactorily, the funds are released to pay for the work. For specifics on loan requirements and terms, go to the Web sites of the various mortgage sponsors including Fannie Mae, www.efanniemae.com Freddie Mac, http://www.freddiemac.com, the FHA, www.hud.gov/progdesc/energy-r.cfm, and the VA, www.homeloans.va.gov.

“Energy mortgages are a great benefit to all parties in a transaction,” says Geri Morgan, ABR, CRS, GRI, of Coldwell Banker Koetje Real Estate in Oak Harbor, Wash. “Buyers can afford the house they want, sellers have a desirable feature to market in their property, and agents can earn higher commissions because they are selling more expensive homes.”

If you’re interested in helping buyers qualify for green mortgages, get to know the green lenders in your area, Glenn advises. For a list of participating lenders in each state, consult the Residential Energy Services Network (RESNET) Web site, www.natresnet.org.

Next Page: Energy Rating Systems