VA Energy Efficient Mortgages (EEMs) are a valuable and often overlooked benefit of the VA Home Loan program.

As utility costs rise and many Veterans purchase homes that need updates, EEMs provide a practical way to lower monthly utility bills, improve comfort and reduce long-term expenses. Increasing awareness of this benefit helps ensure Veterans don’t miss out on a tool that can make homeownership more affordable.  

A VA EEM allows a Veteran to roll the cost of approved energy-saving improvements into their VA-guaranteed home purchase or refinancing loan. These improvements must be permanent fixtures that reduce energy consumption. This allows Veterans to improve their home’s efficiency without taking on separate financing or delaying needed upgrades. While this will slightly increase their monthly mortgage payment, the additional cost is normally offset by a reduction in utility costs over time.  

Veterans may choose to contact a qualified person or firm to conduct a home energy audit and identify recommended energy efficiency improvements. In some areas, utility companies may offer this service. The goal is to help Veterans lower utility costs and live in safe, comfortable homes. While not an exhaustive list, the VA Lenders Handbook 26-7, Chapter 7, Topic 3a. provides examples of eligible improvements:

• Solar heating and cooling systems
• Weather stripping or caulking
• New or additional insulation 
• Storm windows and/or doors 
• Vapor barriers 

EEMs cannot be used for: 

• New construction 
• Luxury items (e.g., hot tubs, spas) 
• Improvements that do not reduce energy consumption 
• Appliances or non-permanent fixtures 

VA establishes two cost tiers for EEMs to ensure improvements are cost-effective and beneficial to the Veteran over time:

Improvement Cost	VA Considerations
Up to $3,000	Based solely on the documented cost of the improvement.
$3,000 – $6,000	Lender must: (1) document the cost of improvements, such as a copy of the bid(s) or contract itemizing the improvements and their cost, and (2) certify that the projected monthly energy savings exceed the increased cost.

VA does not permit EEMs more than $6,000 (38 U.S.C. §3710(d). Generally, improvements must be completed within six months of loan closing, and funds are held in escrow until the lender verifies completion and provides written notification to VA.  

EEM with VA Interest Rate Reduction Refinancing Loans (IRRRL) requirements 

Veterans may also obtain an EEM with a VA IRRRL. The two-tiered EEM improvement considerations listed above also apply to IRRRLs. Additionally, if the monthly payment (principal, interest, taxes, and insurance – PITI) for the new loan exceeds the PITI of the loan being refinanced by 20% or more, the lender must certify that the Veteran qualified for the higher payment. 

VA Loan Guaranty Service remains committed to making homeownership more affordable, and energy-efficient homes support long-term affordability, stability and comfort.