As published in Scotsman Guide's Residential Edition, May 2011.
Americans of all stripes want to live more sustainably. Moreover, many don't have a choice. Increasingly, building codes across the country mandate energy efficiency and reduced waste. Natural resources are limited and heavily regulated. Energy bills continue to climb, and many experts forecast steep increases yet to come.
In many areas of the country, local governments and utility companies provide rebates and tax credits aimed at incentivizing homeowners, builders, investors and others to embrace improvements and materials that reduce energy usage and increase sustainability. As sustainable living continues to gain steam, mortgage brokers and loan originators who incorporate green practices and products into their businesses can create greater demand for their offerings.
The following three tools can help:
Federal Housing Administration (FHA) 203(k) loans
FHA's PowerSaver pilot program
One of the best places to start any discussion about energy-efficiency financing is with the FHA's 203(k) program. The product is FHA's primary program for rehabilitating single-family properties. In many cases, it's the perfect loan product for homebuyers who want to purchase a property needing modernization or repair.
Here's how it generally works:
Borrowers locate a property needing repairs or determine that their current home needs improvements.
They decide on the improvements needed and schedule an inspection with a cost consultant. Or they create a list of allowable improvements to be made.
Either the borrowers or the cost consultant completes a work write-up and prepares a contractor bid package to get cost estimates.
An appraiser uses the work write-up to determine the home's "as-is" and "improved value."
For more information about maximum loan amounts and other 203(k) details, see sctsm.in/fha203k. Also note, if a 203(k) loan is coupled with an energy-efficient mortgage, the base loan amount may exceed the county maximum.
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