The availability of an FHA loan for solar modification of a private residence sometimes means the difference between going green – or not.
Budget considerations continue to be the single greatest obstacle for homeowners considering the option of powering their homes with the rays of the sun. A common fallacy appears to be the belief that a conversion to green energy involves a staggering cost. In many cases, however, government incentives along with an FHA loan for solar purchases and installations is readily available, if one knows where to look. Also called FHA PowerSaver Loans, the program was developed in 2010 as a means of offering homeowners an affordable way to make energy-saving improvements to their residences.
More often than not, the providers of solar energy and equipment can point the homeowner in various directions of financing. These professionals are an invaluable resource in learning all aspects of green energy, associated costs, and financing options. Often, the vendor provides in-house financing. Homeowners, however, are usually better off by purchasing the system outright. Government incentives in many states can reduce the cost of installing an environmentally friendly system by as much as 50 percent. Homeowners who choose to lease the equipment generally pass these savings on to the provider instead of benefitting from the rebates first hand. The savings, therefore, end up in the provider’s pocket.
For most customers, the smarter and financially advantageous choice is to finance a solar system through an FHA loan for solar equipment and installation. This type of financing comes with the advantage that in most cases no appraisal of the home is mandated to qualify, and even homeowners capable of providing only little home equity capital may be eligible for credit approval. To be eligible, the total monthly household income-to-debt ratio cannot exceed 45 percent. Many applicants receive 100 percent upfront funding prior to completion of the project. Interested individuals should note, however, that do-it-yourself projects are not eligible for government financing and a licensed technician is required to perform the installation in order to qualify.
An FHA loan for solar adaption features competitive, fixed interest rates ranging anywhere from 5 to 11 percent. Average credit scores as low as 650 are accepted, and secured amounts up to $25,000 can be financed for up to 20 years without prepayment risk. In addition, financing decisions are made swiftly and without long waiting periods, enabling the homeowner to confidently move ahead with the project within as little as 1-2 business days. In the event of default by the lender, Federal Housing Authority mortgage insurance covers up to 90 percent of the borrowed amount. According to the U.S. Department of Energy, the financing is designed to enable qualified and motivated homeowners to take on “modest additional debt” with the goal of realizing the cost and resource savings resulting from a reduction in residential fuel consumption.
Funding provided by government-backed PowerSaver Loans also applies to other energy-saving residential projects such as energy-efficient windows and doors or insulation or duct sealing.
Especially if faced with the unavailability of affordable consumer or home equity borrowing, qualifying homeowners can find support in their energy-saving endeavors with an FHA loan for solar retrofitting of their homes.