Purchase

FHA Solar Purchase and Refinance Program

Eligible borrowers may be able to combine FHA financing with a brand-new, fully owned solar installation when purchasing a home or completing an FHA rate-and-term refinance. The program may also provide taxable earned-income compensation equal to 3.5% of the applicable property value, up to $13,000, subject to program requirements. Available funds may help with eligible closing-related expenses, reserves, debt payoff, rate buydowns, appraisal shortages, or other approved uses.

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What Is the FHA Solar Program?

The FHA Solar Program allows eligible borrowers to finance a new, fully owned solar-energy system as part of an FHA home purchase or FHA rate-and-term refinance.

The solar system is not financed through a separate second mortgage. Instead, eligible solar costs are incorporated into the FHA financing, subject to FHA, lender, property, and program requirements.

The program also includes separately funded taxable compensation that may become available at or after closing. This compensation is treated as earned income, does not create a second lien, and does not require repayment under the program terms.

Purchase and Refinance Options

FHA Home Purchase: Eligible homebuyers may combine an FHA purchase mortgage with the installation of a new solar system after closing.

Potential uses of the earned compensation may include:

FHA Rate-and-Term Refinance: Eligible homeowners may combine an FHA rate-and-term refinance with a new solar installation. The refinance must meet applicable FHA requirements, including any required net tangible benefit. Cash-out refinancing is not included under the program described in the flyer.

Closing costs
Rate buydowns
Reserves
Debt payoff
Appraisal shortages
Other approved transaction expenses

Potential Program Benefits

No Separate Solar Loan: Eligible solar costs are incorporated into the FHA mortgage rather than financed through a separate consumer solar loan.

No Second Lien: The program does not place a separate second mortgage against the property.

No UCC Filing: The solar system does not create a separate UCC filing.

Earned-Income Compensation: Eligible borrowers may receive taxable earned-income compensation equal to 3.5%, up to a maximum of $13,000.

Purchase and Refinance Availability: The program may be used with an FHA purchase or eligible FHA rate-and-term refinance.

No Published Income Cap: The program flyer does not list a separate program income limit, although FHA qualifying-income and repayment requirements still apply.

Eligible Uses of the Earned Compensation

Depending on the transaction and program approval, compensation may be available for:

The compensation is separate from the mortgage proceeds and is not borrowed against the home's equity.

Closing costs
Rate buydowns
Debt payoff
Reserves
Appraisal shortages
Other approved expenses

Basic Program Requirements

Eligibility may depend on:

FHA purchase or FHA rate-and-term refinance
Minimum 620 qualifying credit score
Eligible primary residence
Brand-new solar installation
Fully owned solar system
Installation completed after closing
Installation generally completed within 120 days
Property eligibility for solar installation
FHA appraisal and property requirements
Borrower income, assets, credit, and repayment ability
Lender and program approval

Properties Not Currently Eligible

Condominiums
Properties with an existing owned solar system
Properties with an existing leased solar system
Transactions seeking to refinance or replace an existing solar obligation

How the Solar Financing Works

Solar Cost Limit: Eligible solar costs may be added up to the lesser of the eligible solar-system cost, or 20% of the property value.

Solar Value and Appraisal: Solar value is not included in the appraisal for purposes of structuring this program.

No Separate Solar Analysis: The program does not require a separate solar appraisal, return-on-investment analysis, HUD consultant, or contingency reserve.

Escrow and Disbursement: The solar funds are managed through an escrow process: 50% is disbursed at closing; 50% is disbursed after final inspection; unused escrow funds are applied as a principal reduction.

How the Process Works

1. Review FHA Eligibility: We review your credit, income, assets, property, occupancy, and purchase or refinance goals.

2. Confirm Solar-Program Eligibility: We determine whether the property, transaction, and proposed solar installation meet current program requirements.

3. Review the Solar Proposal: An approved solar provider prepares the system design, cost proposal, and installation plan.

4. Complete the FHA Loan Process: The loan proceeds through appraisal, underwriting, title review, loan conditions, and final approval.

5. Close the FHA Loan: The purchase or refinance closes with the approved solar amount incorporated into the FHA financing.

6. Complete the Installation: The new solar system is installed after closing, generally within the program's required completion period.

7. Complete Final Inspection and Disbursement: After installation and verification, the remaining escrowed solar funds are released according to program requirements.

Important Considerations

The Compensation Is Taxable: The program describes the funds as earned income. Borrowers should consult a qualified tax professional regarding the potential tax treatment.

FHA Qualification Still Applies: Borrowers must still meet FHA and lender requirements for income, credit, assets, debt-to-income ratio, occupancy, property condition, appraisal, and repayment ability.

Program Availability May Vary: The program is not available in every state and specifically excludes Alaska, Hawaii, North Dakota, South Dakota, and Vermont.

This Is Not Down Payment Assistance: The earned compensation may help reduce overall cash needs, but it is not structured as a traditional grant, forgivable second mortgage, or down-payment-assistance lien.

Solar Savings Are Not Guaranteed: Actual utility savings depend on electricity usage, system production, utility rates, property characteristics, weather, maintenance, and other factors.

Property Value Is Not Guaranteed: Installing solar does not guarantee that the property will appraise or resell for a higher amount.

COMBINE FHA FINANCING WITH A NEW SOLAR INSTALLATION

Whether you are purchasing a home or reviewing an FHA rate-and-term refinance, I can help you compare the mortgage payment, solar financing, estimated compensation, closing costs, and program requirements.

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Frequently Asked Questions

The FHA Solar Program may allow eligible borrowers to combine FHA financing with a new, fully owned solar installation when purchasing a home or completing an eligible FHA rate-and-term refinance. Program requirements vary by transaction, property, borrower, lender, and solar provider.

Yes. Eligible homebuyers may be able to use the program with an FHA purchase loan and include the cost of a qualifying new solar system in the financing.

Yes. Eligible homeowners may be able to pair the program with an FHA rate-and-term refinance. The refinance must meet applicable FHA requirements, including any required net tangible benefit.

Eligible borrowers may receive taxable earned-income compensation equal to 3.5% of the home's appraised value, up to $13,000. The actual amount depends on the transaction and program requirements.

No. The compensation is separately funded and is not borrowed from the homeowner's equity or taken from the mortgage proceeds. It is treated as taxable earned income.

Depending on the transaction and applicable requirements, the funds may help with eligible down payment needs, closing costs, reserves, debt payoff, savings, or other permitted financial needs.

Yes. The compensation is treated as taxable earned income. Borrowers should consult a qualified tax professional regarding their individual tax situation.

The solar program itself may not impose a separate household-income cap, but the borrower must still satisfy FHA and lender income, credit, debt-to-income, occupancy, and repayment requirements.

Credit requirements vary by lender and transaction. A credit review is necessary to determine which FHA and solar-program options may be available.

Yes. FHA financing generally requires the property to be used as the borrower's primary residence.

No. The FHA portion of the program is intended for eligible owner-occupied primary residences.

Generally, the program is intended for a new solar installation. Homes with an existing owned, financed, or leased solar system may not qualify under the same structure and should be reviewed individually.

The program is designed around a new, fully owned solar system rather than a solar lease or power-purchase agreement, subject to the final financing and installation terms.

The qualifying solar cost may be incorporated into the FHA purchase or refinance transaction rather than requiring a separate solar loan, subject to FHA, lender, appraisal, and program requirements.

Condominium eligibility may be limited and depends on the program, FHA project eligibility, association requirements, roof ownership, insurance, and authorization to install solar.

Yes. An FHA appraisal is generally required to evaluate the property and establish the value used for the mortgage transaction and program calculation.

Installation timing depends on the transaction, property, permitting, utility approval, contractor scheduling, and program requirements. The expected schedule should be confirmed before closing.

No. Approval is subject to borrower credit, income, assets, occupancy, property eligibility, appraisal, lender underwriting, FHA requirements, solar-provider requirements, and current program availability.

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