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How to Finance Energy Efficient Homes

Jun 15, 2015

As the demand for energy efficient homes grows, homebuyers are beginning ask questions about financing options and whether they can take advantage of financing options that take energy efficiency into account. Homeowners too, want to know about the options available to them when making energy efficient upgrades to their homes. So if you’re considering opting for an energy efficient new home, or making energy upgrades to your current one and have the same questions, we’ve got some answers for you.


There are two types of energy efficient financing programs that you can consider:

1.    Energy Efficient Mortgage

This type of mortgage is geared towards financing the purchase of energy efficient homes. An energy efficient mortgage allows borrowers to finance and include energy saving measures in their mortgage, and to qualify for larger loans so they can upgrade to more energy efficient homes. To qualify for an energy efficient mortgage, homebuyers must first get an energy rating on the home they want to buy.

2.    Energy Improvement Mortgage

An energy improvement mortgage is for those homeowners who want to make energy efficient upgrades to their existing homes. The mortgage takes into account the costs of these upgrades so that homeowners aren’t faced with the prospect of a larger down payment. To qualify for an energy improvement mortgage, homeowners must first get an energy rating done on their home.


Many conventional lenders, the Federal Housing Administration (FHA) and the Veterans Administration (VA) all offer energy mortgages. In the case of the FHA, keep in mind that the maximum amount of the portion of the energy efficient mortgage available for energy improvements is the lesser of five percent of:

  • The value of the property, or
  • 115% of the median area price of a single family dwelling, or
  • 150% of the conforming Freddie Mac limit.
  • VA energy efficient mortgages are available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. The VA energy efficient mortgage limits energy improvements to $3,000–$6,000.

To learn more about how to finance energy efficient homes, visit HUD.GOV (U.S. Department of Housing and Urban Development) or contact a certified RESNET home energy professional.