Green Financing Part 1 – The Process

One aspect of green real estate isn’t quite keeping up - the financing end.  Energy Efficient Mortgages known as EEM’s have actually been around since after Jimmy Carter and the oil crisis!  But it is still pretty rare to find one that has closed in the Chicago area.  Part 1 of this post will explain what a green mortgage is and the steps required.  Part 2 will outline the different green loan options available. This topic has the potential to change a lot so be sure to contact a trusted lender for more information.

Green financing is available for the purchase of a new green home, or to make improvements to what I call a not-yet-green home.  A green improvement loan could apply either for your existing home or to purchase a new home you plan to fix up.

Steps Required

The thing that makes green loans different is that an extra step is typically required - an Energy Audit or a HERS Rating.  An appraisal assesses the value of the home.  An energy audit assesses the energy efficiency of the home.  (HERS stands for Home Energy Rating System.)  In Chicago these tests usually cost at least $400-600 with the HERS Rating being both more thorough and more expensive.  Results help the lender determine how much you can expect to save on your utility bills.  In most cases, the cost of the additional inspection can be rolled into the amount of your loan. 

The process typically follows these steps:

Step 1 – Buyer/home owner completes the Energy Audit or a HERS Rating. 

Step 2 – Lender increases your approved mortgage amount based on projected monthly utility savings. 

Step 3 – The rest of the closing process is similar to a traditional loan.

Tips:

· Plan ahead so you can complete the extra steps in time. 

· To get the best results, don’t ask a lender if they offer an EEM.  Ask the lender if their local office has closed an EEM loan.

 To learn more about Energy Efficiency Mortgages check out these recommended links:

· EcoBroker International -  http://www.ecobroker.com/misc/lenders.aspx

· HUD - http://www.hud.gov/offices/hsg/sfh/eem/eemhog96.cfm

· RESNET (professional association for energy auditors) - http://www.natresnet.org/ratings/overview/faq_mortgage.htm