d. Underwriting Considerations

Energy efficiency improvements up to $3,000:

The resulting increase in loan payments will normally be offset by a reduction in utility costs.

Energy efficiency improvements more than $3,000, up to $6,000:

The lender must make a determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs.  Rely on locally available information provided by utility companies, municipalities, state agencies or other reliable sources, and document the determination.

Energy efficiency improvements over $6,000:

Lenders should exercise discretion and consider

·   whether the increase in monthly mortgage payments exceeds the likely reduction in monthly utility costs, and

·   whether the veteran’s income is sufficient to cover the higher loan payment.

A VA Certificate of Commitment issued before the decision to make energy efficiency improvements over $6,000 must be returned to VA for a determination that the applicant still qualifies.

Energy efficiency improvements in conjunction with an IRRRL:

If the monthly payment (PITI) for the new loan exceeds the PITI of the loan being refinanced by 20% or more, the lender must certify to having determined that the veteran qualified for the higher payment.