PowerSaver Loan Offers New Way to Finance Solar
Last November, the Federal Housing Authority (FHA) introduced the PowerSaver Loan which provides low-cost loans for energy retrofits of single family homes. The two-year pilot program will provide borrowers with up to $25,000 for certain energy improvements, including solar panels, insulation, duct sealing, doors and windows, HVAC systems, water heaters, and geothermal systems. The program is unique because it does not impose energy rating restrictions or a requirement for an energy audit. Some say it could be a replacement for PACE (Property Assessed Clean Energy Financing) which has been on hold since the FHFA issued a statement citing serious concerns about the program.
FHA Commissioner David H. Steven, said, “PowerSaver provides lenders with a new product option to serve a potentially growing market.” The U.S Department of Housing and Urban Development hopes that they will fund 24,000 loans totaling up to $300 million in its two year term. In addition, the FHA will provide $25 million in grants to incent lenders to participate in the program and pass on savings to borrowers.
A few details have been released about how PowerSaver loans would work, but FHA guidelines have yet to be published. THE FHA would insure up to 90% of the loan and the lender is responsible for the remaining 10%. Homeowners can qualify for a total of $25,000 in FHA Title 1 financing for a 15 or 20 year term. In addition, no mortgage or deed of trust is required if they borrow $7,500 or less, which means much lower closing costs. Interest rates have yet to be set, although we hear they will be competitive. One of the nicest features of this new loan is you can deduct interest on your annual tax return.
In the pilot program, homeowners must meet high credit standards and other restrictions, including a 660 or higher credit score with a maximum of 45% debt-to-income ratio. Loans will only be given to detached single-family homes. Since this is a new program, a list of lenders hasn’t been released. If you are interested in a PowerSaver loan, the FHA has announced that it will restrict the amount of lenders and the communities where the program will be available. Please speak with your bank to see if this is a program they will offer in the future.
The FHA’s PowerSaver loan sounds like a great new way to finance a home solar project. Brightstar Solar is a licensed solar installer in Massachusetts and Connecticut. We work with residential, commercial, and public customers to navigate the installation process and maximize solar financing and incentive opportunities. Please reach out to us you are interested in a complimentary solar evaluation of your home, business, or institution in Massachusetts or Connecticut.