Reducing MIP with Energy Efficient Housing Improvements
While FHA MIP is usually less expensive than the private mortgage insurance one would pay on a privately-insured loan, it can still get expensive. Fortunately, HUD is now allowing investors and developers to reduce their MIP payments to 0.25%, provided they make energy efficient improvements to their project.
How to Qualify for a Reduced MIP
In order to be eligible for reduced MIP for new construction, the developer/owner needs to have a Energy Star Statement of Energy Design Intent (SEDI) performed and must achieve a minimum score of 75. For existing buildings, such as those that are using a HUD 221(d)(4) loan to complete a substantial rehabilitation, the developer/owner needs to achieve a Energy Star SEP (Statement of Energy Performance) of 75. To maintain the 0.25% MIP discount, the developer/owner must maintain a 75+ score over the life of the loan. In addition, buildings must be re-certified each year. Because of that, it's a good idea for buildings to have a score somewhat higher than 75. This gives them a little bit of cushion for future certifications.
If you're interested in getting reduced MIP for your HUD multifamily development under this program, but your building doesn't quite reach a score of 75, you can hire a qualified green building professional to complete an audit and re-design your plans in order to reach the required score.