A recent article highlighted benefits of energy-efficient homes. It could help a person in qualifying for an energy efficient mortgage. A government established private company called Fannie Mae came to the conclusion that the money that is saved could be spent on housing costs.This is so because an energy efficient house costs less money to operate.  Therefore, the projected saving is added to the income of the borrower, which, in turn, raises the income and qualifies them for a larger mortgage.

Built Green came up with a nice example as to how to work this on paper. The EEM started being used after Fannie Mae brought down the complexity of the paperwork, a few years ago. A borrower has to buy a new energy efficient home and pass a Home Energy Rating System inspection, in order to qualify.  The borrower receives a one-page report, which is shown to the lenders while applying for a Fannie Mae-backed loan.  To qualify for an EEM the company now looks at the individual features of the house. For instance, efficient heating and cooling systems. By qualifying buyers for a big loan, the EEM might augment the buying of bigger houses. The EEM might not save energy, even though it might assist Fannie Mae customers in purchasing as much house as they could afford.

This issue becomes important in the case of energy efficient mortgages becoming popular offerings on the remaining lending market.  Fannie Mae is also planning to pilot the Smart Commute Initiative for the borrowers to buy a home adjacent to public transport.  There’s an another option, which is similar to the EEM and is called a location efficient mortgage. Seattle has been chosen as one of the pilot cities for Fannie Mae’s location efficient mortgages.