Today, we’ll take a closer took at the “FHA PowerSaver” loan program, which aims to make it easier for homeowners to make energy-saving improvements to their properties.
In short, the FHA PowerSaver loan is essentially an alternative to taking out a home equity loan or HELOC, both of which have become more difficult to come by ever since the mortgage crisis.
After all, mortgage lenders have lowered maximum combined loan-to-value ratios (CLTVs) considerably, and with home prices not what they once were, it doesn’t leave a lot of room to borrow by tapping equity.
How FHA PowerSaver works:
The FHA PowerSaver program allows homeowners to borrow up to $25,000 for terms as long as 20 years to make certain energy improvements, including insulation, duct sealing, energy-efficient doors/windows, HVAC systems, water heaters, solar panels, and geothermal systems.
The FHA encourages homeowners to get an energy audit to determine which improvements will be most cost-effective and worth their while.
It’s essentially a green improvement loan intended to make your home more environmentally friendly, while also saving you money via lower energy costs.
What about FHA PowerSaver rates?
The mortgage rate for a PowerSaver loan is expected to be between five and seven percent, but comparable or lower than other options available to homeowners.
As mentioned, second mortgages are harder to come by and the interest rates aren’t cheap in most cases, especially when the CLTV is super high.
PowerSaver loans are backed by the FHA, with federal mortgage insurance covering 90 percent of the loan, and private mortgage lenders retaining the remaining risk.
The loans will be subordinated behind existing first mortgages, and borrowers must have existing home equity, as the max combined loan-to-value ratio is 100 percent.
Eighteen national, regional, and local mortgage lenders are taking part in the two-year pilot program.
It is expected to help roughly 30,000 homeowners finance energy-efficient upgrades, while creating 3,000 jobs.
FHA PowerSaver Requirements
Property type: one-unit, owner-occupied properties
Loan term: Up to 20 years
Minimum credit score: 660
Max loan amount: $25,000
Max debt-to-income ratio: 45%
Max combined loan-to-value ratio: 100%
FHA PowerSaver Approved Lenders
1. Admirals Bank
2. AFC First Financial Corporation
3. Bank of Colorado
4. City of Boise, Idaho
5. Energy Finance Solutions
6. Enterprise Cascadia
7. HomeStreet Bank
8. Neighbor’s Financial Corporation
9. Paramount Equity Mortgage, Inc.
10. Quicken Loans
11. SOFCU Community Credit Union
12. Stonegate Mortgage Corporation
13. Sun West Mortgage Company, Inc.
14. The Bank at Broadmoor
15. University of Virginia Community Credit Union, Inc.
16. Viewtech Financial Services, Inc.
17. Wintrust Mortgage
18. W. J. Bradley Mortgage Capital Corporation