Despite the slumping housing market and rising energy bills, the government might help you secure a long-term remodeling loan. Over the past several years the government has taken an interest in steering homeowners in a greener and more energy efficient direction when it comes to residential energy consumption.
The FHA (Federal Housing Administration) is offering the Power Saver Program, a mortgage insurance product to Homeowners desiring to make energy-saving improvements; you can secure up to a 20-year $25,000 loan to make improvements as outlined and approved by the FHA and the DOE (Department of Energy).
Who Qualifies for Mortgage Insurance?
The loan must be secured by an existing first loan. The homeowner's credit score must be a minimum of 660 points in order to be considered a reasonable credit risk. The debt to income ratio must be 45% or less.
It's important to know that the loans themselves are not provided by the government but are simply guaranteed by the FHA, which assumes 90% of any defaulting loan while the commercial lender backs the remaining 10%. The interest rates typically range between 5% and 8%. As of April 21, 2011 there were a total of 18 approved commercial lenders.
What Kind of Home Improvements are Covered?
Since the intent of the Power Saver program is to implement energy-conserving measures, the FDA recommends an energy audit to determine how best to invest the money. Specifically, HUD (Housing and Urban Development) recommends, the installation of insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems.
Items like insulation and replacement doors are relatively inexpensive investments, with the prices rising from there with energy-efficient replacement windows and geothermal systems getting into some serious money. The upside is that after installation, utility bills will be easier to control and some of these investments are eligible for federal energy tax credits.
Since this is a new program, job layoffs continuing to rise nationally, and the lending community is in such a guarded mode, the number of people that will take advantage of this program is difficult to estimate.
As with all capital-intensive renovation projects, it's critical to reevaluate the home's total replacement cost and update homeowners insurance policy after remodeling.
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