SIPs and the ENERGY EFFICIENT MORTGAGE
EEM (Energy Efficient Mortgage) can help you purchase an energy efficient SIP home. The EEM recognizes that energy efficient SIP homes cost homeowners less to operate on a monthly basis than standard homes because they use less energy. Home buyers who choose energy efficient SIP homes can afford to spend more on their housing expenses because they will likely spend less on their energy costs.
Q: How does the EEM benefit the borrower?
A: The EEM benefits the borrower in several ways. First, the estimated energy savings are added
to the borrower’s income to allow the home buyer to qualify for a larger total mortgage amount.
Second, by increasing borrowing power, the EEM allows borrowers to include the costs of energy
improvements into the total mortgage amount. 100% of the energy improvements, up to 15% of
the value of the home, can be financed and paid for over the life of the mortgage, reserving the
borrower’s cash for more immediate, move-in costs. Third, the value of the home is adjusted by
the value of the energy efficiency improvements.
Q: What types of homes can qualify for the EEM?
A: The EEM can be used for one-unit, single-family, owner-occupied principal residences, PUDs,
and condominiums. The homes may be new construction or existing housing.
Q: Can a home that is already an energy efficient SIP home qualify for the EEM?
A: Yes, the EEM can be used for homes that are energy efficient at the time of purchase.
Q: What types of transactions can the EEM be used for?
A: The EEM can be used for both purchase and refinance transactions. The standard EEM can
be used for limited cash-out refinances.
Q: How does a home qualify for the EEM?
A: Existing homes must have a Home Energy Rating System (HERS) report to evaluate the
home’s energy efficiency in its current state or to identify opportunities for cost-effective energy
If the SIP home was newly constructed, the home can have a HERS report or the builder may have followed the guidelines of a Prescriptive Program such as EPA’s Energy Star Builder Option Program (BOP) that specifies the energy efficiency measures in the design and construction process. EPA’s BOP provides the builder with the specific energy measures to incorporate in the home design such
as the SIP envelope that will result in an energy efficient home program. After completion, the home is evaluated with a HERS rating.
Q: What is a HERS report?
A: The home energy rating (HERS) is a standard measurement of the home’s energy efficiency.
An energy rating allows a home buyer to easily compare the energy costs for the homes being
considered. Home energy ratings involve an on-site inspection by residential energy efficiency
professional — a home rater. Home energy raters are trained and certified by the operating home
energy rating system.
The home energy rater inspects the home and measures its energy characteristics, such as
insulation levels, window efficiency, wall-to-window ratios, the heating and cooling system
efficiency, and the solar orientation of the home. Diagnostic testing, such as blower door for
leakage and duct leakage testing, is often part of the rating. The home receives a point score
between 1 to 100, depending on its relative efficiency. An estimate of the home’s energy costs is
also provided. A homeowner who wants to upgrade the energy efficiency can use the energy
rating to evaluate and pinpoint specific, cost-effective improvements.
SIP Supply is recognized as an Energy Star Partner for providing an energy efficient building product.
Q: How does the home energy rater produce the HERS report?
A. The home energy rater inspects the home and measures its energy characteristics, such as
insulation levels, window efficiency, wall-to-window ratios, heating and cooling system efficiency,
solar orientation of the home, and water heating system efficiency. Diagnostic testing may also
be done, which includes using a “blower door” test to check for air leakage and testing for duct
leakage. The results of the inspection are entered into the home energy rating system. The
system uses data regarding the local climate and utility costs, and the data about the specific
home to produce a written report.
The HERS report includes an energy efficiency rating score between 1 and 100. The higher the
score, the greater the energy efficiency. A sample HERS report is included in this document.
Q: How does a home constructed as energy-efficient qualify?
A: The HERS report compares the SIP home against a similar home without the energy efficient
design (often called the “reference home”). The rating should confirm that the final construction
achieves the intended design and performance. For homes that are already energy-efficient, the HERS report will provide the following data required by the Lender for an EEM:
- Estimated monthly energy savings
- Value of the energy efficient measures – known as the Energy Savings Value
Q: What is the rationale for adding to the value of the property?
A: The energy efficiency measures in a home add value to a property, however, this value may
be difficult to assess during the appraisal process. The HERS report provides the amount of
additional value specific energy efficiency measures will add to a home’s total value.
Q: How is present value of the energy savings calculated?
A: The energy rating report will provide the Lender with the present value of the energy
Q: Why is a present value calculation necessary?
A: The present value calculation accomplishes two things. First, in new construction or for a SIP
home energy efficient “as-is,” it may not be possible to isolate the installed costs of the energy
measures. So, the value we attribute is the energy savings over the expected physical life of the
equipment. Second, for homes that will benefit from energy improvements, the present value
calculation is used to determine whether the energy improvements are cost effective.
Q: What is meant by cost effective?
A: The benefit the borrower will receive in energy savings must exceed the cost to install them to
be considered energy efficient. If the benefits do not exceed the installed costs, then the
improvements are not cost effective and the property would not qualify for the EEM. Using
Panels from SIP Supply, the homeowner will realize up to 60% energy savings, and only
marginally more expensive than traditional framing. SIPs prove to be cost effective
Q: What is the typical cost of an energy rating?
A: The cost for a home energy rating is generally between $150 and $400. Some utility
companies and/or government agencies may offer programs to subsidize the cost of the rating.
Q: Can the cost of the energy rating be included in the mortgage?
A: The cost of the energy rating is considered a transaction cost, similar to the costs incurred for
an appraisal or a home inspection, and should be treated like these transaction costs.
Q: Which Lenders offer the EEM?
A: The current list of lenders that can offer the EEM is available on
http://www.fanniemae.com or http://www.efanniemae.com.