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FHA announces home equity loans for green improvements

[Nov 20, 2010.]

 

FHA PowerSaver home equity loan

In May of 2009, the Recovery Through Retrofit Initiative was launched. Reports from the project have identified that providing financing for home energy improvements would not only create jobs, but save middle class families money, and reduce greenhouse gas emissions.

HUD has announced new home equity loans that will finance green home improvements for the installation of insulation, duct sealing, doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems. The new FHA PowerSaver loan will give qualifed home owners cheap loans.

HUD Secretary Donovan said, "HUD and FHA are committed to lowering the cost and expanding the availability of affordable financing for home energy retrofits. PowerSaver will help more homeowners afford common sense, cost saving improvements to their homes, and will create jobs for contractors, installers and energy auditors across the country."

Contact a home loan specialist about home equity loans.

How to qualify for an FHA PowerSaver loan

Homeowners can qualify for up to $25,000 to finance green home improvement projects. Lenders should be offering these new home equity loans in 2011. Basic guidelines will look something like this:

  • Single family homes only
  • Combined loan to value ratios no higher than 100%
  • Loan terms of up to 20 years
  • Interest rates expected to be between 5-7% depending on government grants to lenders
  • Minimum credit score 660
  • Maximum debt-to-income ratios no higher than 45%

The FHA will insure 90% of each loan against default, which means the lenders have a 10% stake in the game. This will encourage lenders to lend responsibly.

Cheap loans will help save the environment

Financing green home improvements has been, to date, one of the obstacles to growing the energy retrofit industry. Homeowners are reluctant to make retrofits due to high upfront costs. The FHA PowerSaver aims to combat the issue. By providing cheap loans to qualified homeowners, the energy retrofit industry can grow, creating jobs while saving the environment.

According to the Recovery Through Retrofit report, there are 130 million homes in America producing about 20% of the country's greenhouse gas emissions. Current green energy retrofits can reduce consumption by about 40% per home and lower greenhouse gases by up to 160 million metric tons by 2020. Additionally, American families, through reduced energy bills have the potential to save $21 billion annually.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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