An Obama official makes an effort to help homebuyers reduce the risks of paying for a bad home.
Not sure whether you’re getting a good deal with your desired house? Department of Housing and Urban Development secretary Shaun Donovan is seeking to devise a rating system that will help determine home buyers if a house is energy efficient and would also incorporate transportation costs to and from offices in the information. If the structure passes the test, Donovan wants to offer a desirable offer: lower mortgage rates. The Washington Post states, “Mortgage terms — higher loan amounts for buyers to make energy-conserving improvements, lower mortgage rates for energy-efficient homes — ‘can be a very powerful tool’ in residential energy conservation, (Donovan) said, and the booming Federal Housing Administration insurance program would be a good place to start.”
There are two implications in this proposal. First, according to the U.S. Environmental Protection Agency’s ENERGY STAR, “Conventional Energy Efficient Mortgagse (EEM) increase the purchasing power of buying an energy efficient home by allowing the lender to increase the borrower’s income by a dollar amount equal to the estimated energy savings. The Fannie Mae loan also adjusts the value of the home to reflect the value of the energy efficiency measures.” If this is so, then how come Donovan is launching the same program that has been around since 1979? It’s because only a few are aware that there is some program like that of the FHA’s and Department of Veterans Affairs’ that can reduce their payments. Interestingly, Fannie Mae also had the Smart Commute Initiative for borrowers buying a home near public transit. This would hopefully encourage more builders to participate and buyers to seek this type of houses.
Second, more programs will be launched as this move will somehow raise the curiosity of buyers who wish to go green with their home options. If it would make payments more affordable with less risk of default, more lenders will actually seek for these mortgages. The key to this program is to get the people informed and let their demand rule the market.