An Energy Efficient Mortgage (EEM) can be used by borrowers to purchase or refinance a home that is already energy efficient, such as an ENERGY STAR certified home, or to finance energy efficient improvements to an existing home. An EEM takes into account the cost savings that accrue to the homeowner as a result of lower utility bills. The value of utility savings is used by the lender to provide more favorable financing terms to the borrower, such as a better debt-to-income qualifying ratio that enables the borrower to qualify for a larger loan amount and a better, more energy-efficient home.

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To obtain an EEM a borrower typically must have a home energy rater or other trained professional conduct a home energy assessment or rating before financing is approved. This assessment verifies for the lender that the home is energy-efficient or will be energy efficient after energy efficient improvements are completed, and provides the lender with the estimated monthly energy savings and the value of the energy efficiency measures — known as the Energy Savings Value. EEMs are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market. Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs.