Getting a solar panel system for your home is an exciting project. You may be saving money on your electricity bill while increasing the value of your home and helping the environment at the same time. We call that a win-win! However, many people shy away from solar because they think they can’t afford the overall upfront cost of going solar.
What most people don’t realize is that there are solar panel loans and other financing available that help make solar more affordable. With these options — including state and federal tax incentives, rebates, and credits — it’s never been easier or more cost-effective to add a solar system to your home. But how does solar financing work? Let’s find out!
FHA and Fannie Mae Loans
Solar panels are considered a home improvement upgrade, so it only makes sense that there are mortgage-type loans that would work for solar financing. For both the FHA 203(k) and Fannie Mae HomeStyle Renovation loans, new homebuyers and existing homeowners can add financing to their mortgage loan to cover home repairs or remodels, including solar panels.
- Advantages of FHA and Fannie Mae Loans: With both options, the mortgage loan and renovation loan are combined, meaning you’ll only have one monthly payment. Fannie Mae loans can be used for renovations on primary residences, vacation homes, or investment properties and can cover “luxury” upgrades like adding a pool or hot tub.
- Disadvantages of FHA and Fannie Mae Loans: For the FHA loan, borrowers must have FHA mortgage insurance, possibly meet with a 203(k) repair consultant, and live in the home as their primary residence to qualify. Fannie Mae may take longer to close on compared to conventional mortgage options. Additionally, not all mortgage lenders offer HomeStyle Renovation loans.
- Who are These Loans Best for?: If you’re looking to purchase a home and add a solar system at the same time, these loans are an excellent option for solar financing. If you currently own a property and want to refinance, you may be able to transition to one of these loans to help you get a better deal.