What is a VA energy efficient mortgage on a home purchase?
It is a way to put the cost of energy-saving improvements into your VA purchase loan instead of paying for them separately after you move in.
VA describes an energy efficient mortgage, or EEM, as letting a veteran roll the cost of approved energy-saving improvements into a VA-guaranteed home purchase or refinancing loan. VA’s Buyer’s Guide adds that an EEM is not a separate VA home loan product.
The federal law behind it, 38 U.S.C. 3710(d), describes guaranteeing loans for the acquisition of an existing dwelling plus the cost of making energy efficiency improvements to it. That is the purchase case this post covers: a resale home in New Braunfels where the inspection turned up something like thin attic insulation or old single-pane windows.
Both VA sources say the same thing about the payment. It goes up a little, and the added cost is normally offset by lower utility costs over time. That “normally” matters, because it describes the usual case and makes no promise about your house or your bills.
If you were going to fix it in the first year anyway, an EEM is one more way to pay for it. If you were never planning to touch it, decide with your lender whether the added loan amount makes sense for you.
It also changes how you think about a repair request. When the inspection flags something energy related, you have three ways to handle it: ask the seller to fix it, ask for a price change, or leave it alone and plan to fix it yourself. An EEM may add a fourth: putting a limited amount of energy work into the loan itself. Ask your lender how the work and the contractor are documented and approved. Which way is better depends on the item, the seller and your budget, so walk through all four with your agent and lender before you send a repair amendment.
How much can you add, $3,000 or $6,000?
The ceiling is $6,000, and how you get there depends on the size of the project.
Federal law caps the energy efficiency cost a VA-guaranteed loan can finance at the greater of two numbers:
- the cost of the energy efficiency improvements, up to $3,000, or
- $6,000, if the increase in the monthly principal and interest payment does not exceed the likely reduction in monthly utility costs from the improvements.
VA’s July 2026 guidance uses the same $3,000 and $6,000 tiers. Before you count on more than $3,000, ask your lender what VA requires it to document and certify for that tier.
VA states plainly that it does not permit EEMs over $6,000. VA’s Buyer’s Guide also puts the limit at $6,000 worth of improvements in your loan.
So the practical questions are what the work will cost and whether the savings math holds up. Ask your lender what cost documents it wants for your tier, and line them up early rather than relying on a ballpark number from a walk-through.
If you want to see what a few thousand dollars does to your payment, run it through the mortgage calculator both ways, with and without the improvement amount.
Which improvements count toward an energy efficient mortgage?
Improvements that cut the home’s energy use. Start with the two VA lists, then the federal definition.
Both VA’s July 2026 article and its Buyer’s Guide list these examples:
- solar heating and cooling systems
- weather stripping or caulking
- new or additional insulation
- storm windows and storm doors
The federal definition points the same way. Under 38 U.S.C. 3710(d), an energy efficiency improvement includes a solar heating system, a solar heating and cooling system or a combined system, and the application of a residential energy conservation measure. The law’s definition of a passive system includes window and skylight glazing, thermal floors, walls and roofs, movable insulation panels used with glazing, and double-pane window insulation.
New construction is the clear exclusion. VA’s July 2026 guidance says EEMs cannot be used for new construction, and the law describes the purchase case as an existing dwelling. If an item on your list is not on either VA list or in the law’s definition, ask your lender before you count on it.
How do you use the inspection to plan the upgrades?
Start with what the inspector found, then decide whether any of it is energy work you want done.
Go through your inspection report line by line and flag anything about insulation, weather stripping, caulking, or where storm windows or storm doors could go. Those are the items both VA lists name. Read those lines with an EEM in mind. Some items are repairs to ask the seller about. Others are upgrades you might rather choose and control yourself.
Both VA sources say you may want to contact a qualified person or firm for a home energy audit to identify recommended improvements, and that in some areas the utility company may offer this service. Ask your utility provider whether it does before you pay someone else.
Timing matters. The TREC resale contract and the farm and ranch contract both give a buyer who delivers the option fee within the time required the unrestricted right to terminate by notice within the option period, and those notices must be given by 5:00 p.m. local time where the property is located by the date specified. The form leaves the number of days blank for the contract to fill in. If you want bids or an audit for an EEM, line them up while you are still deciding whether to go forward, not after.
A few questions to take to your lender early:
- Do you offer the VA energy efficient mortgage, and what do you need from me for each tier?
- What cost documents do you need, and do they have to itemize each improvement?
- How will the improvement amount show up on my loan estimate and payment?
If you are still sorting out the VA side of your purchase, our posts on the VA funding fee and a pending claim and on a VA appraisal that comes in below price cover two other numbers that land at the same closing.
Can an energy report help you qualify?
Federal law, 38 U.S.C. 3710(i), says a lender’s evaluation of your residual income shall include a consideration of the savings estimate in a qualifying energy efficiency report, under VA’s regulations and guidance. Ask your lender how it figures residual income on your file.
If a veteran gives the lender an energy efficiency report that meets the law’s description, the lender’s evaluation of residual income shall include a consideration of the report’s estimate of expected energy cost savings. The law also says the lender may apply its own underwriting expertise in adjusting residual income based on the report.
The report the law describes includes an estimate of expected energy cost savings specific to the home, any information VA’s regulations and guidance require, and energy efficiency information from a Home Energy Rating System rating by an individual certified by the Residential Energy Service Network, as the law names it, or another method VA determines appropriate.
The law makes the savings estimate part of the evaluation and leaves the adjustment to the lender’s underwriting, so whether a report changes your loan is your lender’s call.
The report and the EEM are separate ideas. One is about paying for improvements. The other is about how expected savings figure into qualifying. You might use one, both or neither, so ask your lender about each by name instead of assuming one covers the other.
For military buyers moving to the area, our military relocation guide covers the bigger timeline, and the buyers page walks through the steps from search to keys. On the house itself, pull up the inspection report, mark the energy items, and ask your lender about an EEM before your option period runs out.
