FHA offers $25,000 interest-free loans

This post comes from Brian O'Connell at partner site MainStreet.

The Federal Housing Administration is making an enticing offer to select U.S. homeowners: a $25,000 interest-free loan to "green up" your home and (hopefully) save at least twice that amount, according to Uncle Sam, through increased home energy efficiency.

At $25,000, the pilot program might be worthwhile, especially since there is evidence that greening up your home can enhance its resale value.

A study from the Lawrence Berkeley National Laboratory in California found that the average home can significantly benefit from having solar panels installed. In another survey, the National Association of Home Builders said that by 2015, 68% of new homes will "include more green features and technology, including low-E windows; engineered wood beams, joists or tresses; water-efficient features, such as dual-flush toilets or low-flow faucets; and an Energy Star rating for the whole house."

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In an April press conference in Long Island, N.Y., HUD Secretary Shaun Donovan and Energy Secretary Steven Chu named 18 U.S banks that will participate in the two-year pilot program, dubbed PowerSaver, which was created by Vice President Joe Biden's Middle Class Task Force. The participating banks will forward PowerSaver loans to select U.S. homeowners who make energy-efficient changes to their homes.

The loans are good for up to $25,000 (up to one per home) and can be used for energy-saving projects at the owner's discretion, like added insulation, duct sealing, energy-efficient doors and windows, HVAC systems and water heaters, solar panels and geothermal systems, and getting a home energy audit.

"We believe the market is right for a low-cost financing option for families who want energy-saving technologies in their home," Donovan said. "PowerSaver hits on all cylinders by helping creditworthy homeowners finance these upgrades, cut their energy bills and boost the local job market in the process. While FHA and these lenders are jump-starting this pilot, we hope its success will lead to a growing private sector interest in making these types of loans."

It's catching on

The Obama administration is a big champion of increased energy efficiency, but only lately have builders and homeowners generated enthusiasm for green homes, at least on a mass scale. And even as owners and builders climb aboard the energy-efficiency bandwagon, banks and lenders will be the ones greasing the skids for all those green home maintenance improvements.

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According to a HUD statement, PowerSaver loans will be "backed by the FHA but require these lenders to have significant 'skin in the game.' FHA mortgage insurance will cover up to 90% of the loan amount in the event of default."

With the first 18 banks committed to the project, HUD estimates that there's enough seed money in the first two years of the PowerSaver program to kick-start energy improvements for 30,000 U.S. homes. The agency says the green homes initiative could add 3,000 jobs to the U.S economy.

To qualify for a green home improvement loan, the government says you must have a good credit history and decent equity in your home. The next step is to contact a loan representative at one of the 18 banks participating in the PowerSaver program. You can find a list of them here.

There's no guarantee you'll get the $25,000 back in the form of higher home values, but HUD says homeowners may earn twice the money back after greening up their homes. If that doesn't happen, at least you'll be feeding your altruistic side by doing what you can to keep energy use down at home.

If you're considering such a loan but aren't sure what to do with the money, check out MainStreet's roundup of 10 ways to make your home green.

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