Green Improvements Allow Borrowers to Save on MIP
FHA mortgage insurance premiums, or MIPs, are one of the most important expenses that HUD 223(f) borrowers need to factor into their budget. For most HUD 223(f) borrowers, annual MIP is 0.60% of the loan amount for conventional properties. In contrast, affordable properties receive a reduced MIP of 0.45%. However, with HUD's Green MIP Reduction program, borrowers can get a discounted 0.25% annual MIP, as long as they make energy-efficient improvements to their property and receive a high enough score on an approved certification.
How Can Borrowers Qualify for a Green MIP Reduction?
In order to qualify for a green MIP reduction, a property must be certified and reach a specific score with one of the following certification programs:
Energy Star High Rise or Home
Green Point Rated New Home Multifamily
Passive House, Enterprise Green Communities
Living Building Challenge
When it comes to qualifying for an MIP reduction, Energy Star's program is one of the most popular on the market. In order to qualify, properties need to achieve an Energy Star Statement of Design Intent (SEDI) score of 75 or above (which will be subject to annual inspection and recertification) in order to achieve and maintain their annual MIP discount.
DO hud 241(a) Supplemental Loans qualify for a green mip reduction?
If you already have a property with a HUD 223(f) loan, you may be able to get supplemental financing through the HUD 241(a) loan program. In many cases, that supplemental financing can also qualify for a green MIP reduction of 0.25% to 0.35%. If a borrower uses a HUD 241(a) loan to make green upgrades to their property, they may be able to seek a reduced MIP on both their original HUD 223(f) loan and their new HUD 241(a) supplemental loan.