Location Efficient Mortgage (LEM)

Location Efficient Mortgage (LEM) are available to individuals purchasing more expensive homes in areas where with efficient public transportation systems. These loans take into account monies saved on the expenses related to owning or leasing automobiles.

The concept was developed by the Center for Neighborhood Technology and the Natural Resources Defense Council and is backed by Fannie Mae.

While LEM loans will allow a purchaser to buy a house that is more expensive than they would qualify for using a traditional mortgage, it does not lower the monthly payment.

LEM loans are only available in certain markets:

  • Chicago, IL
  • Los Angeles, CA
  • San Francisco, CA
  • Seattle, WA

With traditional mortgages, there is a limit on how much money is available based on the purchaser’s income. The cost of housing must not exceed 35% of the household’s income (Housing to Income Ratio), and the household’s total debt cost must not exceed 45% of the household’s income (Total Debt to Income Ratio). This is to ensure that after the mortgage is granted, the household will have the ability to pay for all other obligations.

In high density, transit-rich environments, the cost associated with transportation is greatly reduced. This reduction is, for example, $350–$650 per month in Chicago, Illinois. When these extra savings is factored in, the Housing to Income Ratio can be as high as 39%, and the Total Debt to Income Ratio may be as high as 50% to qualify for a loan. In effect, it allows urban dwellers who depend less on automobile use to purchase a more expensive home.

Program advocates warn potential LEM participants that, while there is no limitation on the use or ownership of automobiles, this program does not lower monthly payments to the mortgage company, and that the increased purchasing power is granted based on the presumption that the household is actually taking advantage of reduced car use.


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All loans are subject to underwriting or investor approval. Other restrictions may apply. This is not an offer of credit or a commitment to lend. Guidelines and products subject to change.