When You Need an Energy Report
Energy reports come into play when you're financing energy-efficient home improvements through your mortgage. This typically happens with renovation loans or cash-out refinances where you plan to use the proceeds for qualifying energy upgrades.
If your planned improvements cost $6,500 or less total, you don't need an energy report at all. But once you cross that threshold, Fannie Mae requires documentation proving your improvements will actually save energy and money.
Say you're buying a home and planning $15,000 in energy upgrades — new windows, insulation, and a high-efficiency HVAC system. Your lender will require an energy report showing these improvements make financial sense before approving the loan amount that includes these costs.
What Qualifies as an Energy Report
Fannie Mae accepts three types of energy reports, each with specific performance thresholds.
A HERS report from a certified RESNET Home Energy Rater must show your home will achieve a HERS Index of 90 or below after improvements. The HERS Index works like a golf score — lower numbers are better. A typical existing home scores around 130, so reaching 90 represents significant energy efficiency.
A DOE Home Energy Score Report requires a score of 6 or higher on a 1-10 scale. Unlike HERS, higher numbers are better here. The report must come from an independent Home Energy Score Certified Assessor.
You can also use a comparable rating report from any certified home energy rater or consultant, as long as it demonstrates the property will be a high-performing, energy-efficient home after improvements.
What the Energy Report Must Include
Your energy report needs four specific elements to satisfy Fannie Mae requirements.
First, it must identify exactly what energy improvements you're making and their expected cost. The report can't just say "HVAC upgrade" — it needs to specify the equipment, installation details, and total price including labor.
Second, the report must quantify your expected energy savings in monthly or annual dollar amounts. Vague statements about "improved efficiency" won't work. The rater needs to calculate actual projected savings on your utility bills.
Third, the report must prove cost-effectiveness. This means the total cost of improvements, including ongoing maintenance, must be less than the present value of energy savings over the improvements' useful life. The rater performs this calculation using industry-standard methods.
Finally, the report must be dated within 24 months before or after your loan closing date. You can get the report done early in your planning process or even after closing, as long as it falls within this 48-month window.
Required Documentation for Your Loan File
Your lender must keep the complete energy report in your loan file. If you paid for the report yourself and want reimbursement from loan proceeds, the cost must appear as a line item on your settlement statement.
The report itself serves as the primary documentation, but your lender may also need copies of contractor bids or invoices showing the actual cost of planned improvements. This helps verify that the costs in the energy report match your real-world expenses.
If you're doing the work after closing, your lender may require you to submit completed invoices and receipts within a specified timeframe to prove the improvements were actually made.
Special Rules for Renewable Energy Systems
Solar panels, wind turbines, hydropower systems, and geothermal installations get different treatment under Fannie Mae guidelines.
If you can't get a traditional energy report for renewable energy systems, you can demonstrate cost-effectiveness through income production instead. You'll need all invoices and receipts for the system costs, then compare those costs to the income the system will generate over its lifetime.
The income calculation must account for tax credits, rebates, and ongoing maintenance costs. When the projected income exceeds the net system cost, you've proven cost-effectiveness.
Your appraiser must document this projected income using tools like PV Value or Ei Value, as referenced in Fannie Mae's appraisal guidelines [[5601.4]].
Alternative Documentation Options
For certain types of improvements, you can skip the formal energy report and use simpler documentation instead.
ENERGY STAR certified products only require proof of certification — invoices, receipts, or printouts showing your improvements appear on the official ENERGY STAR product list. This makes sense because these products already meet established efficiency standards.
Health and safety improvements like radon mitigation systems need either detailed invoices showing expected health impacts or a completed EPA Indoor airPLUS Verification Checklist. The key is documenting both cost and expected benefit.
Resiliency improvements for natural disaster protection require invoices and receipts, or an IBHS FORTIFIED Home designation certificate. These improvements focus on preventing future damage rather than reducing energy consumption.
Why Fannie Mae Requires Energy Reports
The energy report requirement protects both you and the lender from financing improvements that don't deliver promised benefits.
Without proper analysis, homeowners often overestimate energy savings or underestimate total costs. A certified energy rater provides objective analysis using standardized calculation methods and local utility rates.
The cost-effectiveness requirement ensures your loan payments for improvements won't exceed your actual energy savings. This protects your overall housing affordability and reduces default risk.
The 24-month dating window recognizes that energy improvements often happen in phases, and market conditions for equipment and labor can change over time.
Common Problems and Complications
Energy reports can create delays if you don't plan ahead. Certified raters may have limited availability, especially during peak construction seasons. Schedule your energy assessment early in your loan process.
Cost overruns pose another challenge. If your actual improvement costs exceed the energy report estimates by significant amounts, your lender may require an updated report or additional documentation proving continued cost-effectiveness.
Some improvements that seem energy-efficient don't actually qualify for financing. Luxury features disguised as energy improvements — like high-end smart home systems — may not pass the cost-effectiveness test even if they reduce energy use.
Regional differences in utility costs and climate can affect whether improvements qualify. What works in Arizona may not be cost-effective in Maine, even for identical equipment and installation costs.
References
For the official guidelines, see 4606.4: Energy reports in the Fannie Mae Selling Guide.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Energy report conditions
Energy report exceptions when proceeds are used to finance renewable energy sources
Energy report alternatives
For Mortgages used to finance eligible improvements with an aggregate cost less than or equal to $6,500, an energy report is not required. For Mortgages used to finance eligible improvements with an aggregate cost greater than $6,500, an energy report must be obtained and retained in the Mortgage file.
An energy report is not required for a “no cash-out” refinance Mortgage used to pay an Existing Debt.
(a)
Eligible energy reports
Energy reports must be one of the following:
Home Energy Rating Systems (HERS) report completed by a certified Residential Energy Services Network (RESNET
®
) Home Energy Rater reflecting a HERS Index of 90 or below (
http://www.resnet.us/directory/search
(opens in new window)
)
Department of Energy Home (DOE) Energy Score Report completed by an independent Home Energy Score Certified Assessor™ reflecting a DOE Home Energy Score of six or greater (
https://betterbuildingssolutioncenter.energy.gov/home-energy-score/home-energy-score-map
(opens in new window)
)
Comparable rating report or audit completed by a certified home energy rater or consultant indicating the property is a high-performing energy efficient property
(b)
Energy reports must:
Identify the energy improvements and expected cost to complete these improvements
Specify the actual or expected monthly or annual energy savings
Verify that the energy improvements are cost effective. Energy improvements are cost effective when the expected cost to complete these improvements, including maintenance, is less than the present value of the energy saved over the useful life of these improvements, and
Be dated no more than 24 months before or 24 months after the Note Date, as applicable
The cost of the energy report may be included in the total cost of the eligible improvements and must be identified on the Settlement Statement if the Borrower is to be reimbursed.
(c)
Energy report exceptions when proceeds are used to finance renewable energy sources
If the energy improvements are related to renewable energy sources (e.g., solar panels, hydropower systems, wind turbines or geothermal systems), and an energy report is not available to demonstrate their cost effectiveness, the cost effectiveness may be demonstrated by:
Obtaining copies of all invoices and/or receipts, as applicable, for the cost of the systems or devices, and
Comparing the cost of the systems or devices, including maintenance, to the income produced over the life of the systems or devices
When the income produced exceeds the net cost (including any tax credits and rebates) of the systems or devices, the cost effectiveness has been demonstrated.
The appraiser must document the projected income by utilizing PV Value, Ei Value or a similar tool as referenced in
Section 5601.4
.
(d)
Energy report alternatives
For certain eligible improvements, the Seller/Servicer may obtain, and, if obtained, must retain in the Mortgage file, alternative documentation in lieu of an energy report:
Alternative documentation in lieu of an energy report
ENERGY STAR Energy Efficient Products
Documentation (e.g., invoices, receipts, printout(s) showing the eligible improvements in the list of ENERGY STAR Energy Efficient Products) verifying the eligible improvements are ENERGY STAR Energy Efficient Products.
At least one of the following:
Copies of all invoices and/or receipts, as applicable, documenting the cost of the eligible improvements as well as their expected impact to health and safety (e.g., for a radon mitigation system, its expected impact on the radon levels in the home)
A completed United States Environment Protection Agency (EPA) Indoor airPLUS (Version 1 (Rev. 04) or higher) Verification Checklist
Resiliency and preventative improvements to either repair natural disaster damage or improve a home’s ability to withstand future natural disasters
At least one of the following:
Copies of all invoices and/or receipts, as applicable, documenting the cost of the eligible improvements. This should include invoices from a contractor for completing the repairs or improving the home, if applicable.
An Insurance Institute for Business & Home Safety (IBHS) FORTIFIED Home™ designation certificate (i.e., FORTIFIED Roof, FORTIFIED Silver or FORTIFIED Gold)
