How to use FHA 203k mortgage for improving energy efficiency?


The FHA 203k mortgage is the primary FHA program for single family home rehabilitation and improvements. One of the ways to use an FHA 203k is for improving energy efficiency projects.

To be eligible, a borrower has to show evidence that the FHA 203k mortgage will be less than the cost-effectiveness of the project. That is, the cost of saved energy has to be greater than the borrowed amount throughout the lifetime of the improvements.

The whole 100% of the improvement energy efficiency project can be accommodated into the FHA 203k mortgage loan and the amount cannot be either over $4000, or  5 percent of the house value and less than $8000. An official energy inspection has to determine the cost of the improvements, as well as the energy savings. The costs of the inspection can be included in the FHA 203k loan.

With the FHA 203k mortgage and an energy saving home improvements, you can go beyond the FHA loan limit for the county, but cannot exceed 110 percent of the real estate value.

Any new construction related to the energy efficiency project must well exceed any current FHA standards, such as the 1992 CABO Model Energy Code (MEC).

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