FHA (Federal Housing Administration) together with HUD (Housing and Urban Development) have unveiled a new mortgage loan program that will become available in 2011. In their effort to help homeowners obtain affordable loans, this new loan is for borrowers who wish to make energy efficient improvements to their homes.
The new FHA Power Saver program will actually be a home equity loan in amounts up to $25,000 for energy improvements such as air conditioners, furnaces and heating, water heaters, window and door replacements, insulation, solar panels, etc. This loan is for borrowers who wish to make energy improvements, but with today's tough lending standards, are unable to secure a home improvement loan. As with any home equity loan, there must be equity in the home in order to qualify. The combination of the regular mortgage and energy loan cannot exceed 100% of the home's appraised value.
As with all loans, even FHA, there are credit guidelines for approval of this loan. Credit scores are required with this loan with 660 being the minimum. The debt to income ratio cannot exceed 45%. FHA will insure 90% of this loan with the approved lenders insuring 10% which will insure against risky lending.
This program is actually a two year pilot program that will be available in certain areas in each state while some areas will offer it statewide. The purpose of the program will be to see if homeowners actually reduced their energy consumption after the improvements were install. They will also be looking at statistics to see if homeowners realized lower energy bills as a result of the upgrades.
If the program takes off, it could mean more competition in the solar energy arena and more jobs in the home improvement industry. Although this loan is scheduled for 2011, FHA still have the Title 1 program available for home improvements and the EEM, Energy Efficient Mortgage available. These are all affordable loans for homeowners who want to update their homes, bring them up to current codes and save money on energy.