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Home Energy Ratings (H.E.R.S.) |
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The Home Energy Rating System (H.E.R.S.) is a nationally recognized energy rating (auditing) program that gives builders, mortgage lenders, secondary lending markets, homeowners, home sellers and buyers a precise evaluation of energy losing deficience's in homes. Each of these groups have different reasons for wanting to have a H.E.R.'s rating done. The primary reason that this system was initiated by the Federal Government is Global Climate Change. Residential energy usage contributes 19% of the greenhouse gas, Carbon Dioxide. By reducing the homes energy consumption through making the buildings shell, the heating and cooling unit and the appliances, more efficient, it is hoped that the Carbon Dioxide level in our atmosphere can level out. Builders can use this system to not only gauge the energy quality of their homes, but also to have a star rating on their home to compare to other similarly built homes. Mortgage lenders use this system to leverage money to install energy improvements, by way of Energy Efficient Mortgages (E.E.M.'s). When these improvements are installed, the rating gives a total for reduction in utility bills. Utility's bills are usually the second highest bills on the monthly debit side of the loan. With a higher Debt-To-Income stretch, home buyers can afford more home. It is said that this created 22% more home ownership. The secondary market endorses EEM's because of the same reasoning. Also, there is less than a 1% default ratio on these loans. Home owners can use this system to have energy audits done on their homes to reduce high energy bills. Only direct payback or "cost-effective" measures are recommended. This helps make energy improvements "an investment." Home sellers can use this system to qualify their homes in comparison to similar homes. A higher star rating, meaning lower utility bills, than similar houses can make a big difference in a sale. The home buyer can add the cost of the energy upgrade into the mortgage cost, by way of an energy escrow account (up to 10% of the total mortgage value). This can help them afford more home or just have lower energy bills. The H.E.R.S. system benefits everyone.
There are other rating system on the market and it is best to check with your State Energy Department for more information.
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New Home Construction |
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The advantages of energy efficientcy in new construction is two fold. Home buyers are able to have more money for their mortgages through lower energy bills and they also are able to receive a higher Debt-to-Income ratio strength when purchasing the home. This strenght is given as long as the house was built in accordance with the newest energy standards. A good test that the home buyer can give a so called energy efficient home is to have a H.E.R.S. Audit done on the home and if it is 4 Stars or greater, it meets the modern model energy code.
Another nationally reconized audit is sponsored by the US government and it is through Energy Star. This is similar to the star you see when you buy a new TV or Washing Machine. It works similar to the above.
Note: Only a certified auditor can preform a EEM Audit. Check the WWW or Contact your local Energy Department for auditors in your area.
All in all these mortgages have not been widely used because of the low interest rates and the ease of refinacing. As the market becomes tighter,and energy cost go higher, look for these to become part of the home buying/selling process! They are good tools now though, if you are purchasing a home and you want to know what to expect from your utility bill. Energy Cost is still one of the highest cost in everyones monthly budget... DO NOT GO INTO THIS BLIND!!! An Energy Efficient home can sometimes save you thousands of dollars a year in comparision to a similar home built the old ways.
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