Do Solar Panels Affect Financing with a VA Loan?

I’m buying a home with solar panels. Can this impact my financing?

Yes, it could.

My name’s Evan Kaufman, your VA loan originator, here to help explain.

So, if you’re going out and you’re buying a home that has solar panels – which have become big in the last few years, which can also be wonderful, help save power and everything – it could impact your financing.

How is that?

Well, if the sellers have a lease or financing that’s outstanding on those solar panels – meaning they’re making monthly payments and they’re not going to pay them off before closing or at closing – and you’re going to assume that debt, then all of a sudden, those debts can count against your debt-to-income ratio.

Remember, when you’re qualifying for a loan, debt-to-income ratio drives a lot of things, and that’s where we take all your monthly debts, including your future mortgage payment, and divide it into your income.

And if it reaches a certain percentage, all of a sudden you can’t qualify for a loan.

So, if we are approving you, assuming one debt-to-income ratio, but then all of a sudden there’s a solar panel lease that wasn’t factored in properly, it could throw out of whack your qualifications on a loan.

So, if you see a home that has solar panels and you want to make sure, you ask, ‘Hey, are those going to be paid off at closing or not?’

So, you want to negotiate in your contract if they are or aren’t.

And if they are, it’s not the end of the world.

Just know that if the solar panels are not paid off, then ultimately your lender is going to want to see that lease agreement or the financing agreement that the sellers have and make sure that it’s transferred properly to you as the buyer at the time of closing.

So that means you want to stay ahead of it, get that agreement right up front before the contract or right after you sign your contract, and then get it to your lender.

Make sure they’re comfortable with it too, and then start the paperwork for making sure you can get it transferred over to your name.

And the lender will make sure that that’s factored into your debt-to-income ratio, so you still qualify for your home.

It can be a big issue for some folks. They’re just not staying ahead of that when they find out they buy a home with the solar panels.

So hopefully, that helps you out.

Just know that if you’re getting a place with solar panels, is it paid off or is it not paid off?

If it’s not paid off, am I going to assume this, and if I’m going to assume it, I need to make sure my lender understands and knows about it, and that we’re still qualifying through that debt-to-income ratio.

My name’s Evan Kaufman, your VA loan originator. Hope this helps you go out there and win a home with a VA loan. Take care.