What we verified in “Energy efficient mortgages: FHA EEM and HomeStyle Refresh”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to HUD Handbook 4000.1, in the energy efficient mortgage section dated April 29, 2019, the EEM program lets the lender finance cost-effective energy efficiency improvements to an existing property at purchase or refinance, or upgrades above the building code for new construction; improvements are cost-effective when their cost is less than the present value of the energy they save over their useful life; it can be used on new or existing one- to four-unit homes, one-unit condominiums and manufactured homes; and with 203(b) purchase or no cash-out refinance loans, 203(h) for disaster victims, Standard and Limited 203(k), and the weatherization policy for existing homes.

   Sources 1 · Handbook 4000.1, II.A.8.c 'Energy Efficient Mortgages (04/29/2019)', p. 428: 'allows the Mortgagee to offer financing for cost-effective energy efficient improvements to an existing Property at the time of purchase or refinancing, or for upgrades above the established residential building code for New Construction'; 'Cost Effective refers to the costs of the energy efficiency improvements that are less than the present value of the energy saved over the estimated useful life'; '(A) Eligible Property Types'; '(B) Eligible Programs and Transactions Types ... 203(b) Purchase; No cash-out refinance; 203(h); 203(k) (Standard and Limited); Weatherization policy (Existing Construction only)' · Checked October 31, 2026

2. According to Handbook 4000.1, the energy package is the set of improvements you agree to based on a qualified home energy rater's recommendations; it can include energy-saving equipment and active and passive solar and wind technology, and cover materials, labor, inspections and the energy assessment, and even a project manager; the financed portion must pass the cost-effective test; for new construction only improvements above the stricter of HUD's adopted energy code or your state or local code count; and if the work changes after closing, a change order and a new audit are needed, and if it is no longer cost-effective, that money goes to pay down the balance.

   Sources 1 · Handbook 4000.1, II.A.8.c.iii, pp. 428–429: 'The energy package is the set of improvements agreed to by the Borrower based on recommendations and analysis performed by a qualified home energy rater'; 'energy-saving equipment, and active and passive solar and wind technologies'; 'materials, labor, inspections, and the home energy assessment'; 'EEM Facilitator (project manager)'; '(A) The financed portion of an energy package must be cost effective'; '(B) ... over and above the greater of'; '(C) a change order along with a revised home energy audit'; 'must be used to pay down the mortgage principal' · Checked October 31, 2026

3. According to Handbook 4000.1, you must get a whole-home energy assessment by a qualified rater, assessor or auditor, certified as a Building Performance Institute Building Analyst Professional or Home Energy Professional Energy Auditor, as a RESNET Home Energy Rater, or meeting your state or local requirements; the report must recommend improvements with savings estimates and a cost-effectiveness analysis for each, show the rater's credential and be no more than 120 days old.

   Sources 1 · Handbook 4000.1, II.A.8.c.iv, pp. 429–430: 'The Borrower must obtain a home energy assessment'; 'using whole-home assessment standards'; 'Building Performance Institute Building Analyst Professional'; 'Building Performance Institute Home Energy Professional Energy Auditor'; 'Residential Energy Services Network Home Energy Rater'; 'meets local or state jurisdictional requirements'; '(B) ... estimates of energy savings and cost-effective analysis for each of the suggested improvements'; '(D) This report must not be greater than 120 Days old' · Checked October 31, 2026

4. According to Handbook 4000.1, the most that can be added to the base loan for the energy package is the lesser of the cost of the cost-effective package from the audit and 5% of the lowest of these three values: the adjusted value, 115% of the area's median single-family price, or 150% of the national conforming loan limit; that amount is added to the maximum base loan and may push the loan above the area's FHA limit; and for new construction, the package cost is subtracted from the sales price when figuring the adjusted value.

   Sources 1 · Handbook 4000.1, II.A.8.c.v–vi, pp. 430–431: 'the lesser of: the dollar amount of a cost-effective energy package as determined by the home energy audit; or the lesser of 5 percent of: the Adjusted Value; 115 percent of the median area price of a Single Family dwelling; or 150 percent of the national conforming mortgage limit'; 'The maximum final Base Loan Amount is determined by adding the maximum financeable energy package amount to the initial maximum Base Loan Amount'; 'For New Construction, the cost of the financeable energy package must be subtracted from the sales price'; 'The maximum FHA Nationwide Mortgage Limit for an area may be exceeded by the maximum financeable energy package' · Checked October 31, 2026

5. According to Handbook 4000.1, the lender figures your debt ratios with the initial base loan, without the energy package, and FHA accepts the payment increase from the package without re-underwriting; the appraisal does not have to reflect the package's value; you cannot get cash back from the transaction, and any excess goes to the balance; if the work is not finished at closing, an escrow is set up, which cannot include your own labor; outside a 203(k), the package must be installed within 90 days of disbursement or the money is used to prepay the loan; and the lender, the rater or an ICC inspector may inspect the installation, and you may be charged an inspection fee.

   Sources 1 · Handbook 4000.1, II.A.8.c.vii–xii, pp. 431–433: 'calculate the Borrower's debt ratios using the initial Base Loan Amount plus the portion of the Upfront Mortgage Insurance Premium (UFMIP) attributable to the initial Base Loan Amount'; 'permit the increase to the Mortgage Payment without re-underwriting or rescoring'; 'the appraisal does not need to reflect the value of the energy package'; 'The Borrower may not receive cash back from the mortgage transaction'; 'Escrows may not include costs for labor or work performed by the Borrower (Sweat Equity)'; 'With the exception of 203(k), the energy package is to be installed within 90 Days of the mortgage Disbursement'; 'apply the EEM funds to a prepayment of the mortgage principal'; 'The Borrower may be charged an inspection fee' · Checked October 31, 2026

6. According to Handbook 4000.1, when a 203(k) is combined with an EEM, the cost of the energy improvements is figured separately from the repairs; the base loan may not exceed 110% of the after-improved value (100% for condominiums); and on a Limited 203(k), energy improvements may be added on top of the $75,000 limit.

   Sources 1 · Handbook 4000.1, II.A.8.a.xi, p. 407: 'The Mortgagee must calculate the maximum mortgage amount without factoring in the cost of Energy Efficient Mortgage (EEM) items'; 'The Base Loan Amount may not exceed 110 percent of the After Improved Value of the Property (100 percent for condominiums)'; 'For Limited 203(k) transactions, the costs for energy improvements can be in addition to the $75,000 limit on total rehabilitation costs' · Checked October 31, 2026

7. In Fannie Mae's Selling Guide published October 7, 2026, Section B5-3.3 is titled 'HomeStyle Refresh Mortgages' and its topic B5-3.3-01 is 'HomeStyle Refresh for Improvements on Existing Properties', dated August 5, 2026; and the former HomeStyle Energy topic address shows a notice that the content has moved.

   Sources 2 · Selling Guide (Published: October 07 2026), table of contents: 'Section B5-3.3, HomeStyle Refresh Mortgages'; 'B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties (08/05/2026)'; old URL /sel/b5-3.3-01/homestyle-energy-improvements: 'The page you are trying to access has moved to a new location' · Checked October 31, 2026

8. According to Fannie Mae's Selling Guide (B5-3.3-01), HomeStyle Refresh is an option for smaller improvements to an existing property, including energy or water efficiency upgrades, environmental remediation (asbestos, lead, mold, radon), disaster preparedness or resiliency and disaster repairs, as well as kitchen or bath updates or adding an accessory dwelling unit; it can be used with standard Fannie Mae products such as HomeReady, down payment assistance or community land trusts; it applies to existing one- to four-unit properties of any type and to manufactured homes if the improvements are not structural; and it can be used on a purchase or a limited cash-out refinance, which can also pay off a PACE loan or other debt that financed energy improvements.

   Sources 2 · Selling Guide B5-3.3-01 (08/05/2026), 'Overview': 'a financing option for smaller-scale home improvements, including: energy- or water-efficiency upgrades, environmental remediation, disaster preparedness or resiliency improvement'; 'Product Eligibility': 'HomeReady loans'; 'down payment assistance programs'; 'Community Land Trusts'; 'Eligible Property and Occupancy Types': 'All one- to four-unit existing properties are eligible'; 'Manufactured homes are eligible provided the improvements do not include structural changes'; 'Eligible Improvements': 'kitchen or bathroom updates'; 'adding or renovating an accessory dwelling unit'; 'asbestos, lead, mold, and radon'; 'Limited Cash-out Refinance Transactions': 'pay off an existing PACE loan or other debt (secured or unsecured) that financed energy-related improvements' · Checked October 31, 2026

9. According to Fannie Mae's Selling Guide (B5-3.3-01), HomeStyle Refresh has no minimum improvement amount; the maximum to renovate an existing property is 15% of the as-completed appraised value, on a purchase or limited cash-out refinance, and if the loan combines new energy improvements with paying off earlier energy debt, the total cannot exceed 15%; the lender manages a completion escrow for unfinished improvements, which must be completed no later than 180 days from the note date; it may fund up to 50% of the cost at closing; it requires an appraisal with an interior and exterior inspection and a certification of completion; and manually underwritten loans may have a debt-to-income ratio up to 45% if they meet the Eligibility Matrix criteria.

   Sources 2 · Selling Guide B5-3.3-01: 'There is no minimum dollar amount for the improvements'; 'For purchases or limited cash-out refinances up to 15% of the "as completed" appraised value of the property'; 'the total of both cannot exceed 15%'; 'The lender must establish a completion escrow for incomplete improvements'; 'The improvements must be completed no later than 180 days from the date of the mortgage note'; 'The lender may fund up to 50% of the total planned renovation costs at closing'; 'an appraisal based on an interior and exterior property inspection'; 'certification of completion'; 'a maximum debt-to-income ratio of 45% is allowed if the transaction satisfies all criteria in the Eligibility Matrix' · Checked October 31, 2026

10. Under VA's regulation (38 CFR §36.4307), an interest rate reduction refinancing loan (IRRRL) may have a higher monthly payment if the increase comes from including energy efficient improvements, and in that case the loan may add the amount authorized for those improvements.

    Sources 3 · 38 CFR §36.4307(a)(3): 'the increase in the monthly payments on the loan results from the inclusion of energy efficient improvements, as provided by § 36.4339(a)(4)'; (a)(4)(ii): 'to improve the dwelling securing such loan through energy efficient improvements, the amount referred to ... plus the amount authorized by § 36.4339(a)(4)' · Checked October 31, 2026

11. According to the CFPB, the counseling agencies on its list are approved by HUD and can offer independent advice about whether a set of mortgage loan terms fits your goals and situation, often at little or no cost.

    Sources 4 · Find a housing counselor: 'approved by the U.S. Department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you' · Checked October 31, 2026