Those familiar with the loan-closing process know that the last thing any participants need or want as they wrap up their paperwork is another clause, codicil or addendum.
But VA’s Energy Efficient Mortgage program may well be worth the extra effort, even if you’re not an eco-warrior. Following through with a bit more red tape could mean $6,000 or more in additional borrowing power or, in some cases, cash in your pocket to make certain home repairs.
Here are five things to know about the benefit, courtesy of VA’s Lenders Handbook and other VA sources:
1. Joint operation. EEM may sound like a standalone mortgage program, but it’s not: It’s an add-on to a home-purchase loan or a refinance loan.
2. Facts and figures. Borrowers can tack on an additional $3,000 to their loans by documenting the planned eco-friendly improvements they’ll make (more on those later). They can add up to $6,000 to the loan if their estimated utility bills will drop low enough to cover the difference in mortgage payments. They can add more than $6,000 in cases where the improvements will raise the home’s value to equal the additional loan amount.
3. What’s covered? Solar energy enhancements qualify, but don’t think you have to cover your roof in panels to rate this benefit. A range of improvements are outlined in the handbook, from major projects (new furnace or water heater) to less-expensive energy-savers (insulation, weather stripping, and so on).
4. IRRRL reality check. If you’re considering an Interest Rate Reduction Refinancing Loan, you could take advantage of the EEM program to make needed home repairs while improving your interest rate. If your furnace is an older model, for instance, a new one likely would qualify as an eco-friendly improvement.
5. Cash out. An IRRRL usually comes without a cash-out option, but veterans can get up to $6,000 in cash to pay for EEM-covered improvements, providing they’re made less than 90 days after the loan closes.