Get USDA Money for Energy Efficient Homes

Wind Energy

In its continuing quest to aid residents of rural America in financing a home, the USDA has released exciting benefits that will help even more families become homeowners. Now it is even easier for an individual or family to get approved for a loan if they are trying to purchase a newer, more energy-efficient home.

Through a new initiative, the USDA has modified the eligibility requirements for low to moderate income families who wish to purchase a home constructed to be, or is in the process of becoming, energy efficient. An energy efficient home can save a great deal of money on energy and utility bills. Thus, the USDA understands that families who wish to own an energy efficient home can afford a higher mortgage payment.

Lower qualifying ratios

When applying for a loan, an individual or family must meet underwriting requirements as set forth by the lending company. Those eligibility requirements change when a loan is guaranteed by a third party government agency, such as the USDA, FHA, and others. With USDA underwriting guidelines for the energy efficiency program, an underwriter can more easily assess a family’s financial situation and debt to income ratios when determining eligibility.

For example, a family that makes $60,000 a year wishes to purchase a home for $200,000. With a calculated monthly payment of $1,350, the family has a loan debt ratio of 27% ($5,000 monthly income divided by $1,350). With loosened ratio guidelines from USDA guidelines, a family who would otherwise require a 26% loan debt to income ratio can be eligible to purchase the home they desire.

Cost may be included in loan amount

A home doesn’t have to be new construction to qualify for the USDA energy efficient home loan. An older existing home can be remodeled with new appliances, insulation, and HVAC to qualify for the loan program. If a family is planning to have the proper remodeling completed on an existing home, they may be eligible to receive extra loan dollars to pay for the energy-saving features.

In the same example above, if the family was approved for a $200,000 loan for the home purchase price and wished to upgrade the home to an energy efficient status for $20,000, the extra $20,000 may be added to the loan amount to pay for the installation of the features.

What features count?

A home must meet the International Energy Conservation Code (IECC) standard to be eligible for the USDA energy efficient loan program. What home features would need to be upgraded to meet the standard?

  • Appliances - EnergyStar appliances, such as washers, dryers, refrigerators, and dishwashers, can also be used to save energy in a home. Installing appliances is most likely the easiest thing a family can do to help make a home energy efficient, but it’s not the only way.
  • Windows - The installation of energy efficient windows can be a big factor in saving utility bills. Energy efficient windows keep a home cool in the summer, while retaining heat inside during the winter.
  • HVAC - Heating and cooling are also important in keeping a home running efficiently. Proper systems that are high efficiency may cost more, but use a lot less energy in the long run.
  • Insulation - Proper insulation in a home is the key to using heating and cooling efficiently, and keeping harsh weather elements outside.

The USDA knows the importance of helping families own their own home. It also knows the value of homes that run efficiently and save money on utilities. With the help of the USDA energy efficient home loan guarantee program, it is now possible for low to moderate income families to qualify for better homes.