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What is a Green Mortgage?
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Well, Green mortgages have been around for years; 1979 to be exact when President Jimmy Carter authorized some legislation about them. Recently, as of the beginning of 2007, their backing by Fannie Mae and Freddie Mac has actually declined. Fannie Mae no longer offers them, Freddie Mac only offers them through their FHA (203)K rehabilitation program, and the VA offers them as well.
The green mortgage that many folks have written about is called, in technical terms< the Energy Efficient Mortgage (EEM). This program provides a home owner with the opportunity to use mortgage financing to make energy efficient improvements to their home.
Others define the green mortgage as a mortgage where the lender gives some discount in closing costs for having energy efficient appliances or other upgrades on the property. Another version of the green mortgage is where the mortgage company agrees to plant trees or do some other form of environmental upgrades on behalf of the consumer taking out the green mortgage.
EEM's are available through FHA and VA and can be taken out while purchasing or refinancing a home. In the case of the FHA rehabilitation loan, or better known as the 203(K) loan, a home owner has to have their property inspected by an inspector authorized to perform a HERS report (Home Energy Rating Systems). This report will determine what home improvements are required to make a home more energy efficient. It will also determine what kind of monthly savings the borrower will see once the improvements are complete.
If FHA approves the energy efficient upgrades then the money for the upgrades is held by the title company until the work is completed. Once it is complete, an FHA inspector or appraiser will go reinspect the home to note the status of the improvements. With the improvements complete the money held by the title company is released to pay the contractors responsible for conducting the work on the home. A homeowner is eligible for somewhere between $4,000 and $8,000 depending on the amount energy efficient improvements to be made.
Regarding the VA Energy Efficient Mortgage, active duty personnel, retired vets, and reservists are eligible for this loan. The borrower is eligible to finance up to $3,000 worth of energy efficient upgrades with documented costs and up to $6,000 if the upgrades are determined to cause the property to be more efficient.
Stay tuned to GetPreQualified.com for additional green mortgage information as time passes. Homeowners are more and more concerned about how they can help with the environment and since the home is a big way for someone to make a difference, green mortgages aren't going away. Rather, green mortgages are just getting new roots.
Article written by: Dale Stouffer. Dale has a bachelor of science degree from the University of California Davis in environmental studies and water science and masters degree in urban planning from the University of New Orleans.
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