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VA Energy Efficient Mortgage

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What is an energy efficient mortgage?

A VA energy efficient mortgage, or VA EEM, is not really a home loan all on its own. Instead, it's an add-on loan that can give you up to $6,000* in addition to your total loan amount.

You can use this money to make home improvements that increase your home's energy efficiency, with the end goal of lowering your utility bills.

*EEMs over $6,000 do exist, but they are very rare and difficult to get.

How does it work?

You can add a VA EEM to any VA loan type. Most commonly, it gets used with either type of VA refinance loan. However, it can also be added on to a VA purchase loan. Some other important things you should know include:

  • The work needs to be approved before you can get started
  • All repairs must be completed within 6 months from closing
  • Not all improvements are allowed

How do I know how much money I'll get?

Even though VA EEM loans can go up to $6,000, that doesn't mean that's how much you'll automatically get. In general, there are three cost tiers you can fall into, and each tier has its own documentation requirements before the EEM can get approved. These tiers are:

  1. Improvements under $3,000
  2. Improvements of $3,001–$6,000
  3. Improvements over $6,000

For the improvements that fall into the first tier, an itemized quote or a bid from a contractor may be enough to get that EEM amount. However, in the other two tiers, you will need a detailed energy audit that justifies the costs and makes sure the amount you save on your utility bills will offset the increase to your loan amount. In the third tier, you'll also need approval from the VA.

Allowed energy-efficient upgrades

Not every improvement is allowed, even if it is technically an energy efficient upgrade. For example, EEMs don't cover the cost of replacing your appliances with ones that are ENERGY STAR® certified. You can get a full list of the allowed improvements from your lender.

But, to get you started, here is a short list of the upgrades that will get you the most bang for your buck:

  • Solar heating & cooling systems for air and water
  • Weather stripping
  • Furnace efficiency modifications
  • Clock thermostats
  • New or additional ceiling, attic, wall, and floor insulation
  • Storm windows and/or doors, including thermal windows and/or doors
  • Heat pumps
  • Vapor barriers

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