Posted by Elisabeth Leamy, Fri May 19 2006, 08:35pm

What if I told you I've found a way you can buy a house that's a little beyond your means

What if I told you I've found a way you can buy a house that's a little beyond your means? And that once you move in, it'll be cheaper to maintain than other houses? Still reading? I thought so. I've just discovered the "Energy Efficient Mortgage." It's a federally-recognized program that gives you a larger loan if you purchase an energy-efficient house or agree to make energy-efficient upgrades.Here's how it works. You find a home you're interested in. You hire a trained energy rater to perform a Home Energy Rating Systems report –or HERS report-- on the home. (A HERS report typically costs between $100 and $300, and some of that can be rolled into the mortgage.) First the rater gives the house a score for its current energy efficiency. Then, if applicable, he or she recommends energy upgrades for the house. Next, the rater calculates the cost of the improvements and the savings they will provide. Finally, the rater issues an "Improved Rating Score" that reflects how efficient the house would be with the suggested upgrades.

You show the report to your lender. Why would lenders be willing to give you a bigger loan just for buying an energy efficient house or making energy efficient improvements? Have they suddenly become gung ho environmentalists? Not really. They do it because the less money you have to spend on power bills, the more money you'll have available to pay your mortgage. (And the bigger your mortgage, the more money they make!) Let's say you can qualify for roughly a $133,000 mortgage on a standard house. The government estimates you'd be eligible for a $142,000 mortgage on an energy efficient house --$9,000 more!

Energy Efficient Mortgages are also available if you're staying in your current home and refinancing it. They can be especially beneficial if you plan to remodel anyway. Say the house could use energy improvements, like a new furnace for $5,000. Often lenders will increase the amount of your mortgage by the estimated cost of those improvements –in this case $5,000. One final benefit: because the improvements were rolled into your mortgage, you may get a larger mortgage interest deduction on your federal taxes.

If you're interested in obtaining an Energy Efficient Mortgage, ask your lender about it. They're not well known, so if your lender isn't up to speed, you can get information from HUD, The Department of Energy, Fannie Mae or Freddie Mac.