USDA Energy Efficient Mortgage
Whether you’re interested in reducing energy bills or would like to make less of an environmental impact, you can do so though the USDA loan program.
Via the USDA’s Rural Energy Plus loan, homebuyers can receive $0 down financing when purchasing or building a home that meets IECC energy efficient standards.
USDA Rural Plus Eligibility
In addition to the general USDA loan eligibility requirements, properties that fall under the USDA Rural Plus mortgage must meet the following requirements:
- Existing homes must meet, or be retrofitted to meet, current International Energy Conservation Code (IECC) standards – or a comparable code approved by the USDA.
- New construction must be built to current IECC standards – or a comparable code approved by the USDA.
The International Energy Conservation Code or IECC is a set of standards for energy efficient construction. These standards include mechanical, lighting and power systems that emphasize performance and reducing reliance on fossil fuels.
Your lender will certify the home meets current IECC standards and will make this part of the underwriting analysis submitted to the USDA for conditional commitment for loan guarantee.
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Why Choose a USDA Rural Plus Mortgage?
Homes that meet the latest energy-efficient standards have lower utility bills and conserve energy, making more income available for other debt obligations. Due to this, the primary benefit of using the USDA’s Rural Energy Plus loan is that the USDA may add flexibility to the principle, interest, taxes and insurance (PITI) and debt-to-income (DTI) ratios required for loan approval.
Without an approved exception, PITI can’t exceed 29% of your total income and DTI can’t exceed 41%. This means your mortgage payment (including taxes and insurance) can’t exceed 29% of your total income and your total debts, including PITI, can’t exceed 41% of your total income.
With an energy efficient mortgage, the USDA reserves the right to expand that ratio. Without a debt waiver, the expanded ratio for PITI can’t exceed 31% and the expanded ratio for DTI can’t exceed 43%.
To see if you’re eligible for a Rural Plus mortgage, fill out our short form here and talk to a home loan specialist.