USDA Loan Program to Encourage Energy Efficient Homes

June 14, 2006

The U.S. Department of Agriculture (USDA) announced on June 6th that it will loosen its requirements for low- and moderate-income families buying energy efficient homes in rural areas through the Rural Development Section 502 homeownership loan program. Under the special program, called Home Energy Advantage, the qualifying ratios for home loans may be exceeded by up to two percentage points if an energy-efficient home is purchased. The program recognizes that owners of energy efficient homes spend less money on utility bills, so they can afford larger mortgage payments. The cost of installing energy-saving features or buying energy-efficient appliances may be included in the loan amount. See the USDA press release.

The USDA program is similar to Energy Efficient Mortgages (EEMs), which are offered through the Federal Housing Administration (FHA), a part of the U.S. Department on Housing and Urban Development (HUD); the Department of Veteran's Affairs; Fannie Mae; and Freddie Mac. See the HUD Web site for a description of EEMs and a list of specific requirements for an FHA EEM.