Those solar panels or radiant-heated stone floors could help snag a larger home loan under legislation now pending in the U.S. Senate.
The SAVE Act would require Fannie Mae, Freddie Mac and the Federal Housing Administration – about 90 percent of the mortgage market – to add energy efficiency to their underwriting policies.
Mortgage lenders and appraisers do not systematically consider the value of a home’s energy-efficient technology, said Robert Sahadi, director of energy efficiency finance policy at the Institute for Market Transformation, a nonprofit Washington, D.C.-based group promoting green building. The organization co-authored the bill.
Sen. Michael Bennet, D-Colo., and Sen. Johnny Isakson, R-Ga., filed the bill in June. The bipartisan SAVE Act legislation has dozens of co-sponsors, and support from a broad variety of groups, including real estate agents, consumer organizations and environmental advocates. SAVE stands for Sensible Accounting to Value Energy.
While utility bills are ignored in mortgage underwriting, they usually amount to more money than real estate taxes or homeowner’s insurance, the institute says.
The typical U.S. homeowner pays $2,500 on home energy bills annually, according to the institute. The organization estimates an energy efficient upgrade, even a small one, could reduce a home’s energy bills by 30 percent or more.
The bill would help borrowers in two ways.
Lenders would factor in energy cost savings when arriving at a borrower’s debt-to-income ratio, which could result in a larger loan. Lenders would add future energy savings to the home’s value, if that is not already reflected in the appraisal.
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