What is the VA Energy Efficient Mortgage (EEM)?

The VA Energy Efficient Mortgage (EEM) is a special type of VA loan that enables veterans to finance energy-efficient upgrades as part of their home purchase or refinance.

The goal of the program is to help veterans reduce their energy costs, which in turn can lead to long-term financial savings.

This program is particularly appealing to those who are interested in making their homes more environmentally friendly while also enjoying the benefits of a VA loan.

Key Features of the VA EEM Program:

• Incorporation into VA Loans: The EEM can be added to both new purchase loans and VA refinance loans, allowing for a seamless integration of energy-efficient improvements into your overall mortgage.
• Flexible Improvement Costs: Borrowers can finance up to $6,000 in energy-efficient improvements without requiring an energy audit. If you plan to borrow more than $6,000, you will need to provide detailed documentation showing that the upgrades will result in energy savings.
• Wide Range of Eligible Improvements: The EEM program covers a broad spectrum of energy-efficient upgrades, including new HVAC systems, solar panels, insulation, and energy-efficient windows and doors.

Eligibility Requirements for the VA EEM

To qualify for the VA Energy Efficient Mortgage program, borrowers must first meet the basic eligibility criteria for a VA home loan. This includes:

• Veteran or Active-Duty Service Member Status: The primary eligibility criterion is that the borrower must be a veteran, active-duty service member, or an eligible surviving spouse. A Certificate of Eligibility (COE) is required to confirm this status.
• Credit and Income Standards: While the VA does not set a specific credit score requirement, lenders typically prefer a credit score of at least 620. Borrowers must also demonstrate sufficient income to cover the mortgage payments and existing debts.
• Property Requirements: The property must be the borrower’s primary residence, and it must meet the VA’s Minimum Property Requirements (MPRs), which ensure that the home is safe, sound, and sanitary.

Types of Improvements Covered by the VA EEM

The VA Energy Efficient Mortgage program supports a variety of energy-efficient upgrades that can help reduce utility costs and enhance the overall comfort of your home. Some of the most common improvements include:

• Heating, Ventilation, and Air Conditioning (HVAC) Systems: Upgrading to an energy-efficient HVAC system can significantly lower your heating and cooling costs.
• Solar Panels: Installing solar panels can reduce or even eliminate your electricity bills, making this a popular choice among EEM borrowers.
• Insulation and Weatherization: Adding insulation and weather-stripping can improve your home’s energy efficiency by keeping the heat in during the winter and out during the summer.
• Energy-Efficient Windows and Doors: Replacing old windows and doors with energy-efficient models can reduce drafts and improve your home’s insulation.
• Energy-Efficient Appliances: Upgrading to energy-efficient appliances such as refrigerators, dishwashers, and water heaters can lead to long-term savings on your utility bills.

Common Energy-Efficient Improvements and Potential Savings

Improvement Type	Estimated Cost Range	Potential Annual Savings	Additional Benefits
Energy-Efficient HVAC System	$3,000 – $7,000	$200 – $400	Improved indoor air quality and comfort
Solar Panels	$10,000 – $30,000	$500 – $2,000	Reduced reliance on grid electricity
Insulation and Weatherization	$1,500 – $4,000	$100 – $250	Enhanced home comfort and temperature control
Energy-Efficient Windows and Doors	$5,000 – $15,000	$150 – $300	Reduced drafts and improved insulation
Energy-Efficient Appliances	$1,000 – $3,500	$50 – $150	Lower energy bills and modernized home features

The Loan Process for VA EEM

The process of securing a VA Energy Efficient Mortgage is similar to that of a standard VA loan, with a few additional steps to account for the energy-efficient improvements.

Step 1: Pre-Qualification

Begin by getting pre-qualified for a VA loan through a lender that offers the EEM option. This step will help you understand how much you can afford and what your monthly payments might look like.

Step 2: Obtain Your Certificate of Eligibility (COE)

As with any VA loan, you’ll need to obtain a Certificate of Eligibility (COE) to prove that you qualify for VA benefits.

Step 3: Select Your Home and Improvements

Work with your real estate agent to find a home that meets your needs. At the same time, identify the energy-efficient upgrades you wish to finance through the EEM.

Step 4: Obtain Estimates for Improvements

Get detailed estimates from contractors for the energy-efficient improvements you want to include in your loan. These estimates will be crucial for determining the total loan amount.

Step 5: Loan Application and Approval

Submit your loan application, including the estimates for the energy-efficient improvements. The lender will review your application, assess the property’s value, and ensure that the planned upgrades qualify under the EEM program.

Step 6: Closing and Renovations

Once your loan is approved, you’ll move forward with the closing process. After closing, you can begin the renovations as outlined in your loan agreement. The funds for the improvements will be disbursed as the work progresses, ensuring that the project stays on track.

VA EEM Loan Process Overview

Step	Description
Pre-Qualification	Determine loan eligibility and potential budget for home purchase and improvements
Certificate of Eligibility	Obtain COE to confirm VA loan eligibility
Home Selection and Improvement Planning	Choose a home and identify energy-efficient upgrades
Obtain Contractor Estimates	Secure detailed cost estimates for planned improvements
Loan Application and Approval	Submit loan application and receive approval, including EEM-related documentation
Closing and Renovations	Finalize loan and begin the renovation process

Maximizing the Benefits of VA EEM

To get the most out of the VA Energy Efficient Mortgage program, consider the following strategies:

• Prioritize High-Impact Improvements: Focus on upgrades that offer the highest return on investment in terms of energy savings and home value.
• Work with Experienced Contractors: Choose contractors who have experience with VA EEM projects to ensure that the work meets VA requirements and local building codes.
• Plan for Future Savings: Consider how the improvements will impact your long-term financial goals. Energy-efficient upgrades can significantly reduce your utility costs over time, making them a smart investment.
• Consult with a VA-Approved Lender: Not all lenders offer the EEM option, so it’s important to work with a lender who understands the program and can guide you through the process.

The Bottom Line

The VA Energy Efficient Mortgage program is an invaluable resource for veterans and active-duty service members looking to reduce their energy costs and increase the value of their homes.

By financing energy-efficient improvements as part of your VA loan, you can enjoy long-term savings and a more comfortable living environment. Whether you’re purchasing a new home or refinancing your existing mortgage, the VA EEM program offers a flexible and cost-effective way to make your home more energy-efficient.

If you’re considering taking advantage of the VA Energy Efficient Mortgage program, consult with a VA-approved lender to explore your options and determine how this program can benefit you. With the right approach, you can enhance your home’s energy efficiency and enjoy the many advantages of VA homeownership.

Frequently Asked Questions

What is a VA Energy Efficient Mortgage (EEM)?

A VA Energy Efficient Mortgage (EEM) is a loan add-on that helps eligible veterans finance energy-efficient home improvements, such as new insulation or solar heating, within their VA loan.

Who qualifies for a VA Energy Efficient Mortgage?

Veterans, active-duty service members, and certain eligible surviving spouses who qualify for a VA loan can also qualify for an EEM if they plan to make approved energy-efficient upgrades.

What types of improvements are covered by a VA EEM?

Covered improvements include energy-efficient upgrades like insulation, solar heating, cooling systems, energy-efficient windows, and similar projects that reduce energy consumption.

How much can I borrow with a VA Energy Efficient Mortgage?

You can borrow up to $6,000 for approved energy-efficient improvements through a VA EEM, depending on the expected energy savings and total loan amount.

How do I apply for a VA Energy Efficient Mortgage?

To apply, consult with a VA-approved lender when securing your VA home loan, and discuss your interest in adding an EEM for energy-efficient upgrades.

Does the VA EEM increase my monthly mortgage payment?

Yes, the amount borrowed for energy improvements is added to your VA loan principal, potentially increasing monthly payments based on the added loan amount.

Is there a down payment required for a VA Energy Efficient Mortgage?

No down payment is required specifically for the EEM, as it is added to your existing VA loan if approved, typically with no additional down payment needed.

How does the VA verify the improvements qualify for EEM financing?

The VA or lender will likely require a detailed description and estimate of the improvements, along with proof of energy savings, before approving EEM funds.

When can I add an EEM to my VA loan?

You can add an EEM at the time of purchasing a home with a VA loan or when refinancing an existing VA loan, provided you meet eligibility requirements.

Do I need to prove the energy savings after completing improvements?

Yes, lenders may ask for evidence or estimates showing the expected energy savings after the improvements are complete to justify the EEM financing.