Who this is for
- Buyers purchasing a home that needs efficiency upgrades
- Homeowners refinancing to add solar or HVAC
- Buyers who want upgrade costs in the mortgage rather than on credit cards
- Borrowers in high-utility-cost states looking to cut monthly bills
Typical Energy-Efficient Mortgages (EEM) requirements
| Programs | FHA EEM, VA EEM, conventional (Fannie/Freddie) EEM |
|---|---|
| Audit | HERS rating or equivalent energy audit required |
| Improvement cap | Varies by program; typically tied to audit-projected savings |
| Qualifying | Stretch ratios may allow slightly higher DTI on some programs |
| Improvements | Must be cost-effective per the energy audit |
Figures are typical market ranges as of October 2026. Actual terms depend on the lender, your credit, the property and the program, and are confirmed on your Loan Estimate or term sheet.
How it works
- Get a certified home energy rating (HERS) identifying cost-effective improvements.
- The lender sizes the EEM portion from the audit, improvements must pay for themselves in projected savings.
- For purchases, the EEM amount is added to the base loan; for refinances, it is added to the new mortgage.
- Close with the improvement funds escrowed.
- Complete the work within the program’s required timeframe with qualified contractors.
- A final verification may be required confirming the improvements were installed.
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Pros and cons
Advantages
- Roll upgrade costs into mortgage-rate financing instead of high-rate debt
- Lower utility bills from day one in the improved home
- May qualify with slightly stretched ratios on some programs
- Increases home comfort and resale appeal
Trade-offs
- Requires a certified energy audit, an extra step and cost
- Only "cost-effective" improvements per the audit qualify
- Smaller lender pool; not every loan officer knows EEM guidelines
- Contractor and completion timelines add moving parts
Documents you’ll need
- HERS rating / energy audit report
- Contractor bids for the improvements
- Standard purchase or refinance loan documents
Energy-Efficient Mortgages (EEM) FAQ
Can I finance solar panels with an EEM?
Yes, solar is one of the most common EEM improvements, provided the energy audit shows it is cost-effective for the property. Leased solar can complicate title and appraisal; owned systems are cleaner for mortgage purposes.
How much extra can I borrow with an EEM?
It depends on the program and the audit. FHA and VA EEMs allow the improvement cost on top of the base loan within program caps; conventional follows Fannie/Freddie limits. The audit’s savings projection is the gating factor.
Is an EEM the same as a PACE loan?
No. PACE (Property Assessed Clean Energy) is repaid through property tax assessments and creates a super-priority lien, most mortgage lenders will not allow it. An EEM is part of your mortgage. They are very different products.
What is a HERS rating?
A Home Energy Rating System score from a certified rater, measuring the home’s energy efficiency. The EEM amount is based on the improvements the rating identifies as cost-effective.
How much does the energy audit cost?
Typically $300-$500 for a HERS rating. Some lenders credit it back at closing.
Can I use an EEM on a refinance?
Yes. FHA, VA, and conventional EEMs all work on refinances, adding the improvement cost to the new loan.
What improvements qualify?
Solar, HVAC upgrades, insulation, windows, water heaters, and similar items the audit shows will pay for themselves in energy savings.
How long do I have to complete the work?
Usually 90 days to 6 months after closing, depending on the program. Funds sit in escrow until an inspector verifies completion.
Do EEMs get better rates?
The rate is the same as the underlying loan program. The benefit is financing improvements at mortgage rates instead of credit card or personal loan rates.
Official sources
How Energy-Efficient Mortgages (EEM) compares
| Energy-Efficient Mortgages (EEM) | FHA Loans | VA Loans | Conventional Loans | |
|---|---|---|---|---|
| Best for | Buyers purchasing a home that needs efficiency upgrades | First-time buyers | Veterans and active-duty service members | Buyers with good credit and steady income |
| Down payment | , | , | $0 with full entitlement | 3% (eligible first-time buyers), 5%+ otherwise; 15–25% on investment property |
| Credit | , | 580 for 3.5% down; 500–579 with 10% down | VA sets no minimum; lenders commonly look for 580–620 | 620 |
| Income docs | , | , | , | , |
Typical ranges, your Loan Estimate or term sheet confirms actual terms.
Coming soon: a 2-minute walkthrough from our loan team.
Related programs
FHA Loans
An FHA loan is a government-insured mortgage that allows 3.5% down with a credit score of 580 or higher, or 10% down with a score from 500 to 579.
VA Loans
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs that lets eligible veterans, active-duty service members and certain surviving spouses buy with no down payment and no monthly mortgage insurance.
Conventional Loans
A conventional loan is a mortgage not insured by the government that follows Fannie Mae or Freddie Mac guidelines.
Fannie Mae HomeStyle Renovation Loans
The Fannie Mae HomeStyle loan rolls your purchase (or refinance) and renovation costs into a single conventional mortgage, one loan, one payment, based on the home’s after-renovation value..