Having an energy-efficient mortgage for your home can be extremely helpful for those who want to save money and protect the environment. These mortgages can help you pay for improvements to your home that can increase its energy efficiency. The mortgage and the upgrades it provides will help ensure your home is protected from the elements and your carbon footprint is reduced.
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These mortgages can be expensive. However, if you are an Armed Forces veteran, you can use your VA loan to finance your energy-efficient home improvements! Read on to understand all your options with your VA renovation loan, how to qualify, and what you can spend the money on.
Once you have all the information and are ready to take the next step in getting an energy-efficient mortgage, reach out to our brokers at Districtlending.com. We know how to work with veterans and treat them with the respect they deserve. We will be on your side and get you the loans you need.
Understanding VA Loans Energy Efficient Home Improvements: Texas
Once you get your VA energy-efficient loan, you will have several options regarding what to do with it. In the state of Texas, the Federal Housing Administration will insure loans of $25,000 or less once you qualify. Then, you have several options when it comes to spending the funds.
VA Energy Efficient Mortgage (EEM)
If you want to add funds to your VA refinance loan, you can obtain an energy-efficient mortgage. The VA EEM loan amount typically is around $3,000 to $6,000. These renovation costs allow veterans to do several things, such as buying a green-certified home or upgrading a traditional house with improvements. Thankfully, there are no additional qualifications, as you only need to qualify for a traditional VA loan with no down payment.
VA Cash-Out Refinance
A VA cash-out refinance, on the other hand, takes your home’s equity into account. It allows you to finance the ownership of your home and energy-efficient repairs, all with one loan. It is best if you owe less on your home than it is worth.
Texas Veterans Home Improvement Program (VHIP)
The Texas Veterans Home Improvement Program helps veterans take out low-interest loans for home improvements. It’s the perfect loan option if you want to buy a home as well as repair it. The Federal Housing Administration insures loans of $25.000 or less, provided the house being repaired is your residence.
Qualifying for VA Energy-Efficient Mortgages
To qualify for VA renovation loans, you need to understand and meet the eligibility requirements. Thankfully, you only need to be eligible for a VA loan, and then you can roll your energy-efficient upgrades into your VA mortgage with no down payment.
Eligibility Requirements for VA Loans
To be eligible for a VA loan, you or your spouse need to meet the following guidelines:
- Have served 90 consecutive days of active service during wartime;
- Served 181 consecutive days of active service during peacetime;
- Have served with the reserves or the National Guard for 6 years, or 90 days (with 30 consecutive ones) under title 32 orders;
- You are the spouse of a service member who died while serving or from a disability obtained in the service;
- You were discharged under very specific circumstances, such as a service-connected disability or at the government’s request.
Additionally, while the VA doesn’t have a credit score requirement, most lenders for VA renovation loans will have one. While the requirements vary by lender, the average requirement for a VA renovation loan is about a 620 FICO score. Additionally, you will need residual income to provide a cushion against emergencies, and this should be enough extra income to cover your family’s needs.
Specific Requirements for Energy-Efficient Upgrades
To spend your VA renovation loan on eligible upgrades, you need to know a few things. First, all improvements need to be considered permanent to the home. These can include adding solar panels or a solar water heater, modifying the efficiency of the furnace, or installing storm doors and windows.
In the process of obtaining your VA energy efficient loan approved, your home will go through a Home Energy Rating System (HERS) test. This energy audit will assess the home’s energy performance by determining how much the proposed improvements would save you on your energy bills. That will then determine how much money you will receive for your VA energy-efficient mortgage.
Working with VA-Approved Lenders
Since you will be working with 3rd party lenders on your VA mortgage, you need to focus on finding the right ones. Thankfully, many veteran associations will have resources and tips for finding recommended lenders.
Additionally, make sure you read and understand all of the terms and conditions of your loan, especially when it comes to minimum credit score and income requirements. These terms and conditions can greatly affect your VA renovation loan, so make sure you have a full understanding before you move forward.
Energy-Efficient Improvements Eligible for VA Loan Financing
There are two major requirements for making improvements to your home with green mortgages. First, the improvements must be permanent fixtures and additions to the house. Second, they must reduce the monthly utility cost of your home. Some of these energy improvements include:
- Installing renewable energy systems such as solar panels;
- Modifying HVAC systems to be more efficient;
- Making structural repairs like caulking;
- Adding insulation to walls and ceilings;
- Adding thermal windows and cooling systems such as vapor barriers;
- Upgrading the home with smart home technology.
Financial Benefits of Energy-Efficient Upgrades
There is a serious financial incentive to have an energy-efficient household. For starters, your home’s energy efficiency means your utility bills will go down, and you will save money. It also leads to a reduced carbon footprint that is better for your home, your neighborhood, and the planet.
Renewable energy equipment can also allow you to take advantage of both state and federal tax credits, rewarding you for having the equipment on your property. Finally, a VA energy-efficient mortgage can provide you with healthier air and water quality, as well as improved comfort, which you can never put a price on.
Steps to Take to Finance Energy-Efficient Upgrades with a VA Loan
To start to get the benefits of an energy-efficient mortgage, you need to follow a few steps.
- You need a home energy audit to figure out what tier of upgrades you are available for.
- After the audit, you will receive between $3,000-6,000 for eligible improvements.
- Many VA lenders and licensed contractors can provide loans, so do your research to find the best ones for your needs.
- Apply for the VA loan with a Certificate of Eligibility and several other requirements.
- Once all the paperwork and requirements are completed, the loan will be finalized with a final inspection.
It might seem complicated, but there are several resources to help you complete your VA appraisal and receive your loan. Then, you can start making energy-efficient updates on your home and reaping the benefits!
Conclusion
Getting a VA EEM loan is extremely beneficial for your home and for the long-term success of both your wallet and the planet. Plus, it can be a lifesaver for those who have just left military service and need a good loan program to get back into civilian life. If you are looking for the perfect lender to help you get the process started, please contact us at District Lending. We can’t wait to help you!
