Solar panels on a house

Energy-efficient mortgages: A guide to green financing, rebates and tax credits

An energy-efficient mortgage, also known as an EEM, is a financial tool that bundles the costs of certain energy-efficient improvements into your mortgage to spread these costs over the life of your loan. Energy-efficient mortgages are available for new homebuyers to finance energy-saving measures and existing homeowners to refinance energy-saving improvements for an older, less efficient home.

Going green is the wave of the future to help more customers bundle energy-efficient improvements into their mortgages to save on their monthly utility bills. These programs help our customers improve their homes by establishing sustainable homeownership. — Maranda McKee, Guild Mortgage Manager, Product Development

Energy-efficient homes cost less to own than non-efficient homes and can increase the potential resale value of your home. According to the U.S. Department of Energy, upgrading your home to save energy can put up to 20% of your energy bill back in your pocket every year. Learn how to reduce energy use, save money and make your home more comfortable with an energy-efficient mortgage.

Which upgrades qualify for an energy-efficient mortgage?

These green home upgrades may qualify for one or more energy-efficient mortgage options:

  • Installing solar systems

    On average, heating and air conditioning account for more than half of a home’s energy use. Lower your electric and natural gas consumption and your utility bill by converting sunlight directly into electricity.

  • Switching to a programmable thermostat

    Smart thermostats are not just beneficial because they enable control of your heating and cooling system from your smartphone. They can also learn your daily habits and cool or heat your home only as much as needed. Using a smart thermostat that meets ENERGY STAR certification saves approximately 8% on heating and cooling bills.

  • Adding insulation

    If you’re looking to minimize energy loss, properly insulating your home from top to bottom is key. Insulation in the attic and walls lowers your heating and cooling costs and makes your home more comfortable in the summer heat and winter chill.

  • Sealing air leaks

    Along with adding insulation, properly sealing air leaks that may be hidden in the attic and basement as well as around windows, doors, and air ducts is the most cost-effective way to save energy.

  • Replacing or updating windows

    Windows and doors act as a barrier to wind, heat and cold. To reduce the amount of energy lost through windows, you can update your windows with caulking and weatherstripping, add storm windows or install exterior blinds.

  • Improving water efficiency

    Water heaters are the second-highest source of energy use in your home. By swapping a standard electric water heater with an ENERGY STAR high-efficiency model, you can save thousands in electricity costs over the appliance’s lifetime.

  • Updating appliances

    Installing highly efficient refrigerators, dishwashers, and washing machines can benefit your wallet. While you may pay more upfront, the cost of operating these products is less than their non-energy efficient equivalents.

How to qualify for an energy-efficient mortgage?

Whether you’re planning on refinancing or in the market for a new home, qualifying for an energy-efficient mortgage starts with getting pre-approved. Then, for most programs, you’ll need a professional energy assessment of your home’s insulation levels, heating and cooling systems, and windows. During a home energy checkup, a home energy technician or auditor will identify what improvement your home needs to make it more eco-friendly. The key is to show that your planned energy-efficiency improvements will be cost-effective.

Differences between energy-efficient mortgages

There are various energy-efficient mortgage programs, including government-insured loan programs.

FHA Energy-Efficient Mortgage (EEM)

As a current homeowner or new homebuyer, you may be able to finance energy-efficient improvements with an FHA Energy-Efficient Mortgage. This program recognizes the monthly utility cost savings when homebuyers make energy-efficient improvements. According to HUD, benefits for buyers include getting a more comfortable home now instead of waiting and qualifying for a larger loan on a better home. For refinancers, get the help of an EEM and make improvements without moving.

Because cost-effective energy improvements result in reduced utility bills making more money available for mortgage payments, an FHA EEM can be used to finance the cost of energy-efficient improvements into a new mortgage without the need to qualify for additional financing.

  • Like a VA EEM, an FHA EEM requires borrowers to obtain a home energy assessment.
  • You may finance the cost of the energy inspection report as part of the mortgage if the entire package, including these fees, is cost-effective.
  • The total mortgage amount is based on the value of your home plus the projected cost of energy-efficient improvements.
  • You’re responsible for hiring contractors and getting bids for the work on your home.
  • The improvements must be completed within 90 days after closing.

FHA Solar*

Include the cost of a Photovoltaic (PV) Energy System into your purchase loan or refinance. Once your loan is closed, the solar panels can be installed within 90-120 days.

FNMA Solar*

If you’re buying a new construction home, bundle the cost of an added solar energy system into your Conventional loan to start saving money right away.

FNMA HomeStyle Energy

Create a comfortable, efficient and resilient home when you bundle items like smart thermostats, upgraded windows, solar systems and more into this sustainable loan option. Our most popular option, you can use the FNMA HomeStyle Energy mortgage to pay off energy liens such as PACE loans. In addition, we allow up to $6500 in energy-efficient repairs without requiring a home energy report.

VA Energy-Efficient Mortgage (EEM)

Are you a military veteran or service member who is eligible to apply for a VA loan? If so, you may qualify for a VA Energy-Efficient Mortgage. VA loans offer veterans home loan rates that are lower than traditional mortgages and can allow veterans to borrow up to 100% of the property’s value. In addition, as part of the VA loan program, you can finance up to $6,000 in energy-efficient upgrades like heating and cooling systems, insulation and more to make an older home more enjoyable and affordable.

  • A VA EEM requires a home energy assessment, also known as a Home Energy Rating System (HERS) report. The audit includes recommendations to reduce a home’s energy use and estimates the costs for energy-saving improvements with the potential savings of each improvement.
  • Improvement costs are added to your loan balance and are repaid as part of your monthly mortgage payment.
  • Generally, the improvements should be completed within six months of the loan closing date.

Energy-efficient tax credits and rebates

In addition to energy-efficient mortgage programs that allow you to finance the cost of making energy-efficient home improvements, you can also go green and save with the following energy incentives.

Tax credits

Incentives for homeowners using renewable energy products may be available in the form of tax credits. Energy-efficiency improvements or installation of alternative energy equipment may qualify. For example, the residential energy efficient property credit offers credits for a percentage of costs of qualified improvement products such as energy-efficient exterior windows, doors and skylights and energy-efficient heating and air conditioning systems.


Some states, local governments and utilities provide money-saving rebates for reducing water consumption and energy-efficient purchases.

Guild offers several different energy-efficient mortgage programs. Our newest program, GreenSmart Advantage Program powered by The Home Depot®**, creates options to finance up to 5% of your home’s appraised value in energy or water-efficient improvements like washers and dryers, smart thermostats, dishwashers, and refrigerators into your FHA mortgage. Available to first-time homebuyers with down payment options as low as 3.5% available and credit scores as low as 580. Let’s talk!

*Available in the following sunshine states: Arizona, California, Colorado, Florida, Georgia, Hawaii, Nevada, North Carolina, South Carolina, Texas and Utah. ** Guild Mortgage is not affiliated with The Home Depot. The Home Depot is not a sponsor of this promotion. The Home Depot is a registered trademark of Home Depot Product Authority, LLC. All rights reserved. Appliance costs added to the loan incur finance charges over the life of the loan. The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

By |Published On: June 15th, 2022|Categories: Guild Blog, Mortgage 101|Tags: , , , |

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.