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  • savingshomeimprovementThe subtitle of today’s post is a slight overstatement. Although the new PowerSaver program is generating a lot of interest since Vice-President Biden and Secretary Donovan announced the launching of the new program, most of the important facts of the program are unresolved. However, here is what we know as from today; expect changes.

    Starting Date

    There is not a firm starting date for the PowerSaver program. Right now the FHA is looking for lenders to finance the program and is hoping to receive expressions of interest from lenders. A list of approved lenders is expected early-on in 2011.

    Purpose

    PowerSaver has a two-fold purpose. First, it is a program designed to offer low-cost loans to help homeowners invest in the energy-efficiency of their homes and save on money on energy bills. Homeowners will be able to choose from a list of home improvements which have been proven to increase the energy efficiency of houses.

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    Secondly, it is a program designed to create jobs in the sector of “Green Construction”. Although it is yet unclear what effect this program will have on the construction industry, you can’t argue that the program has a nice ring to it. A plan to offer cheap loans to help you save money on your monthly bills and create jobs. Now we just need someone to pay for it.

    Who can apply?

    As it stands, the PowerSaver loans program is restricted to homeowners of 1-unit, detached principal residences. This means you have to live in the house you wish to improve.

    The Loan Terms

    The PowerSaver program offers eligible homeowners up to $25,000 loans with terms of up to 15 years. If you invest in renewable energy improvement you may extend the term to 20 years.

    The Catch

    The small catch is PowerSaver loans will be paid in two installments. Half when you close the loan, and half after you have finished the improvements and they have been duly inspected by your lender.

    The Requirements

    The program will require homeowners to have a credit score of 660 or higher, and no foreclosures, bankruptcies and other skeletons in the closet. The debt-to-income ratio of the homeowner must be kept to 45 percent or lower after the closing of the PowerSaver loan.

    What does the FHA offer lenders?

    The FHA offers approved lenders a 90 percent loan-level coverage capped at 10 percent of the lenders total loan portfolio. This means that if you do not make payments on your loan the FHA will pay your lender up to 90 percent of it.

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