Repairs and improvements may be added to the sales price before calculating the mortgage amount when

• the repairs and improvements are
• required by the appraiser as essential for property eligibility, and
• paid by the borrower, and
• the sales contract or addendum identifies the borrower as responsible for
• payment, and
• completion of the repairs.

Important: Only repairs and improvements required by the appraiser may be included.

References: For information on

• the repair and improvement amount that can be added to the sales price, see HUD 4155.1 2.A.5.a, and
• repair and improvement exclusions, see HUD 4155.1 2.A.5.c.

The repair and improvement amount that may be added to the sales price before calculating the maximum mortgage amount is the lowest of the

• amount that the value of the property exceeds the sales price
• the appraiser's estimate of repairs and improvements, or
• the amount of the contractor's bid, if available.

Repairs and improvements completed by the borrower before the appraisal are not eligible to be included when calculating the maximum mortgage. This amount becomes part of the borrower's required cash investment.

The mortgage amount may be increased if the cost of energy-related weatherization items paid by the borrower is added to the property. Examples of energy-related weatherization items include

• thermostats
• insulation
• storm windows and doors, and
• weather stripping and caulking.

These items may be added to both the sales price and the appraised value before determining the maximum mortgage amount.

Note: A contractor's statement of the cost of work completed, or a buyer's estimate of the cost of materials must be submitted.

Reference: For information on cost estimates and statements of costs of work for weatherization items, see HUD 4150.1 RV-1, Valuation Analysis for Home Mortgage Insurance.

The energy-related amount that can be added when calculating the maximum mortgage amount is either

• $2,000 without a separate value determination
• up to $3,500, if supported by a value determination by an approved FHA roster appraiser or Direct Endorsement (DE) Underwriter, or
• more than $3,500
• subject to a value determination by an approved FHA roster appraiser or DE Underwriter, and
• with a separate on-site inspection made by a FHA-approved fee inspector or DE staff appraiser.

If repairs and energy-related items cannot be completed before loan closing due to weather-related delays, the lender must establish an escrow account to ensure all required repairs are eventually completed.

References: For more information on

• repairs and improvements, see HUD 4145., REV-2, Architectural Processing and Inspections for Home Mortgage Insurance, and
• satisfying repair requirements, see HUD 4155.2 4.6.

The cost of solar energy systems may be added directly to the mortgage amount before adding the UFMIP, and after applying the LTV factor limits.

The amount added is limited to the lesser of the solar energy system's

• replacement cost, or
• effect on the property's market value.

The statutory mortgage limit for the area also may be exceeded by 20 percent to accommodate the cost of the system.

Note: Active and passive solar systems, as well as wind-driven systems are acceptable.

Reference: For more information on adding solar energy system costs, see HUD 4150.1 REV-1, Valuation Analysis for Home Mortgage Insurance.

For information on calculating the mortgage amount for HUD REO sales with repair escrow, see HUD 4155.1 6.A.10.a.

If the energy efficient improvements are "cost effective" as determined by the lender based upon the report from the HERS or energy consultant, 100 percent of the cost of the energy efficient improvements (subject to certain limits) may be added to the mortgage amount.

Reference: For more information on the mortgage calculation for the Energy Efficient Mortgage Program, see HUD 4155.1 6.D.