I have my eye on a house I want to buy, but I know it will need a new heat pump soon. I don't have the cash to pay for one now and I know I should make some other improvements like replacing the windows and getting some more insulation because the seller's utility bills are really high. Is there a way to pay for these repairs as part of my loan?

Making energy-efficient improvements to your home can be a smart move for several reasons. Not only will you lower your utility bills, but you'll also improve the value of your home which can improve your equity and, if you decide it, you'll earn a bigger profit.

The Federal Housing Administration (FHA) has an Energy Efficient Mortgage (EEM) program that lets you wrap the cost of energy improvements to your home into your loan payment. If you have other remodeling you want to do, you use this loan program along with an FHA 203(k) loan so that all your home improvements can be paid for with one loan. If you're only focused on energy efficient improvements, you can just stick with the EEM loan.

Like other FHA loans, you'll need a credit score of 620 to 640 or above and will have to document your income, assets and job history to qualify. The entire loan balance must be at or below the FHA loan limits for your county, which you can find on the FHA.gov site or by asking a lender. You must make a down payment of 3.5 percent.

The big difference with an EEM loan is that you can finance the improvements up to the lesser of: the dollar amount of the improvements and the cost of an energy inspection or 5 percent of the home's value.

Consult with a mortgage lender who has some experience with EEM loans to find out if this can help you finance your home and make improvements at the same time.

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