Homeowners can now get a government loan to green up their homes, but be warned: this route isn’t for everyone. The Department of Energy recently launched the PowerSaver program, a program aimed at decreasing homeowner energy bills by reducing energy usage. Certain homeowners will be eligible for $25,000 in government loans for energy-saving improvements. But the money comes with some strings attached.

Who’s eligible

You have to be a homeowner with some equity in your home to join the program. Renters need not apply. Also, no loan will be issued to anyone with a credit score of less than 660. Your current yearly-income-to-debt ratio can’t be higher than 45 percent, and all the money must be paid back within 20 years. The combined loan-to-value ratio for all loans on a home, including the PowerSaver loan, cannot exceed 100 percent.

How to get on board

The loans are available through 18 lending agencies that were chosen because of their “commitment to work in partnership with established home energy retrofit programs provided by states, cities, utilities and home performance contractors.” The list, which includes Quicken Loans, can be found here. If you meet the requirements and are interested, contact the lending institutions and go from there.


How does it work?

The 18 regional and national lenders have agreed to participate on a two-year basis as part of a pilot program with the Department of Energy and the Department of Housing and Urban Development (HUD). The Federal Housing Administration, which falls under the HUD umbrella, is authorized to cover up to 90 percent of any defaulted loans. Lenders will retain the remaining risk on each loan, a detail that is expected to encourage responsible lending. 

What does it include?

The loans will be used for home improvements, including the installation of insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels and geothermal systems.  

Positives and negatives

Energy Secretary Steven Chu says the program will create 3,000 construction jobs nationwide. This economic impact is in addition to the green benefits of reducing pollution and saving energy. But not everyone is thrilled with the concept. Some critics say this is an example of big government and the Obama administration “choosing” some energy sources over others.

What you need to know about the new program for green home loans
The federal government and private lenders team up on a new green home improvement program, but it comes with a few strings attached.