Systems

Tick. Tick. Tick. It's the sound of your power and light bill noisily rising each month. While increasing energy costs are problematic for all, they're especially tough for those with fixed incomes and few discretionary dollars.

The good news is that energy costs need not sink ownership dreams. There are steps you can take to hold down fuel bills, including three big ones:

Purchase an energy-efficient home.

Many first-time buyers gravitate to new construction since buyers assume such homes more readily meet energy-efficient guidelines. But don't overlook resale homes that have been upgraded and/or remodeled. Ask for copies of utility bills for the past year to gauge how existing homes compare with other properties of similar age, size and construction.

Keep in mind that a newly-constructed, poorly-built home could end up costing you significantly more to heat and cool than an older, soundly built or updated/remodeled one.

Use mortgage financing that rewards energy efficiency.

It's a little-known fact that certain types of mortgage financing reward those who purchase energy-efficient homes.

For instance, Energy Efficient Mortgages (EEMs) from the Federal Housing Administration (FHA) allow more liberal qualifying ratios when purchasing an energy-efficient home. Lenders allow borrowers to qualify with up to 2 percent more housing debt (called the front ratio) as well as monthly consumer debt (the back ratio). For example, the qualifying guidelines are usually 28 percent for the front ratio and 36 percent of the back ratio for conventional loans, 29/41 for FHA loans, and 31/43 for EEMs.

In practical terms, if you have a household income of $5,000 and 29 percent of your gross monthly income can be used for principal, interest, taxes and insurance, then lender guidelines will allow you to have basic housing costs equal to $1,450 per month. If the front ratio is 31 percent, then $1,550 is available for basic housing costs -- enough for a larger home, or at least a more expensive one.

Why do EEMs allow more liberal qualifying ratios? The rationale is that a buyer purchasing an energy-efficient home will pay less for utility costs and is therefore better able to handle higher mortgage payments.

Increasingly higher utility costs lead to higher rents.

One way to save more for a down payment is to pay less for rental housing. This means looking for rental units which stress energy efficiency in two ways:

First, you want units which have separate utility meters rather than shared utility costs. Why? Separate meters allow you to control your own energy costs.

Second, you want a rental unit where the owner has invested in efficient appliances and systems. Modern systems can cut energy costs, thereby allowing you to save more each month.

No one wants to pay more for energy costs, but this is a problem you can influence by making good choices. Rent the right property, use the right financing, and buy the right home and you can cut energy costs every day.

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