Lenders are the latest to jump on the “green” bandwagon. Citigroup’s group mortgage division launched a program offering $1,000 off closing costs with its energy efficient mortgage. Last month, Bank of America launched the “energy credit mortgage”, offering $1,000 credit toward closing fees for mortgages on new homes that meet efficiency requirements set by the government’s energy star program. J.P Morgan Chase is offering the expanded energy conservation mortgage which gives borrowers credit as well as $500 off closing costs if they find a builder who will use a specific type of spray-foam insulation.

You maybe asking yourself, “How could lenders qualify people for larger loans, especially in this real estate market?”

Lenders are allowing borrowers to qualify for bigger loans because lenders permit the estimated savings on utility bills to be added to the borrower’s qualifying income. For example, energy efficient improvements could save the borrower $50 per month, that is $600 extra a year which converts to an additional $10,000 on a 30 year mortgage, depending on the interest rate.

Builders love these loans as they help to sell more homes, homeowners get a higher mortgage amount to borrow, and lenders make loans. Seem like a win-win-win.

Of course, the real issue to you the investor should be, “Is this something I can afford?” All of the incentives in the world to get a loan are great. However, if you can’t afford it, don’t do it, even if the lender or builder says you can!

This entry was posted on Wednesday, October 31st, 2007 at 9:09 am and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.