[Ask an RU] Permanent Heat Source Requirements

As you start turning up your thermostat to ward off dropping temperatures, have you ever stopped to think about the permanent heat source in your home and what was considered for underwriting that home?

My guess is because you’re an underwriter, you probably have.

While many of us may take a permanent heat source for granted, there are plenty of questions that arise about how universal guidelines for heat sources are, in which states do they apply, what kinds of properties do they apply to, and more.

In this post, we’ll dive into these questions so you feel confident the next time a question around permanent heat sources comes up.

Definition of Permanent Heat Source

A reliable heat source is defined as permanently installed and self-fueled. This would include forced warm air heated by gas or electric, radiant heat, baseboard units heated by electric, or installed wall units.

Sources such as space heaters that are not installed or fireplaces and wood stoves would not fit the description of permanent and self-fueled.

Agency Guidelines on Permanent Heat Sources

Fannie Mae and Freddie Mac have slightly different statements around permanent heat sources.

Fannie Mae says that properties that are not suitable for year-round occupancy regardless of location are ineligible. Freddie Mac says the property must be suitable for year-round occupancy regardless of the location, except as specifically permitted otherwise in Section 4201.15 for certain second homes.

The confusion comes with the GSEs not specifically stating what’s required for a home to be considered suitable for year-round use. We typically receive feedback that the GSEs do not specifically require a heat source. However, the interpretation of acceptable year-round use would include a reliable heat source per the definition we covered above.

Enact Guidelines on Permanent Heat Sources

Let’s discuss a few permanent heat source situations that we’re asked about frequently.

Q: Does Enact require a permanent heat source in all states?

A: Hawaii is the only state where we don’t require a permanent heat source for year-round livability.

Q: Will Enact insure a seasonal type property without an acceptable, permanent heat source?

A: If the loan is being insured as a 2^nd home in a resort type area, we would consider a home without a heat source. This assumes that the home would be winterized in the off-season, thereby reducing the chance of pipes freezing or other damage that may occur. However, the appraisal would need to demonstrate market reaction/acceptance with the inclusion of comparable sales offering similar lack of heat.

Q: Does Enact accept space heaters and window units for small spaces (ex. 500 sq ft)?

A: These are not considered acceptable by Enact as a permanently installed, year-round heat source, regardless of the size of home or seasonal use.

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If you have any questions about heat sources and acceptability, feel free to reach out to your Enact Regional Underwriting at 800-444-5664, Option 2.