FHA loan allows for energy-efficient updates to older home

By Lori Johnston

For the AJC

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Leah Carroll First-time buyer Leah Carroll worked hard to get an FHA loan that enabled her to make $13,500 in improvements to her home.

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If the idea of buying a home is overwhelming, not to mention the cost and time needed to make energy-efficient updates to an older one, here’s how one recent Atlanta buyer chose a loan to cover the cost of improvements.

The buyer: Leah Carroll, 31, who works for Fulton County Schools where she tests children for developmental delays.

The challenge: For her first home purchase, Carroll found a two-bedroom, one-bath home in Grant Park, dating to 1935, but wanted the efficiency of a newer home. The home, which was a foreclosure, lacked insulation in the attic and needed other major changes. “After the home inspection and just realizing how much work there was that needed to be done to the home ... I just kind of had a freak out moment," she said. "How in the world [was] I going to pay for all of this?”

The solution: Her agent, Virginia Moran with Keller Williams Realty Atlanta-Perimeter, suggested that she pursue an FHA Energy Efficient Mortgage. The mortgage allowed her to increase her financing for a standard FHA loan by up to 5 percent of the home’s appraised value. She rolled the FHA Energy Efficient Mortgage into an FHA Streamlined 203(k) loan, which provides up to an extra $35,000 into a mortgage so buyers can improve or upgrade their home before moving in. She had about $13,500 in updates, from repairing plumbing to insulating her attic and crawl space. The loan’s interest rate was a quarter-point higher than she would have had, but Carroll said she was getting a great deal by negotiating down from the home’s list price of $130,000.

How she did it: Carroll said an important step was to immediately connect with a company qualified to make the changes. Retrofit America arrived one day after her home inspection, providing a home energy audit and assistance as she pursued financing. “Right away, when you put the bid in on the home, you need to have people coming out. You can’t have a delay,” she said. Contractors had to place bids and get approval to do the work before her loan could go through.

The outcome: She purchased the home, which has about 1,100 square feet, in February. Retrofit sprayed open-cell foam to insulate and seal the air under the attic roof. It also encapsulated the crawl space by installing a heavy duty liner across the floor and sprayed closed-cell foam insulation on the foundation walls. It sealed the ducts in the crawl space for even air circulation. Geoff Berlin, CEO of Retrofit, said adding insulation, sealing air leaks and sealing ductwork are three main improvements to make homes more energy efficient and those changes can drop the cost of heating and cooling by 20 to 60 percent. “It feels really different in the home,” Carroll said. “It was cold in there and drafty. Now it’s totally sealed.” Her first monthly bills have been lower than expected, with $30 for electricity and $54 for heat. “Even living in apartments, I've never had such a cheap bill before,” she said.