I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.
California leads the country in rooftop solar, and a large share of those systems are leased or sold through power purchase agreements (PPAs) rather than owned. When you buy one of these homes — or refinance your own — the solar agreement becomes part of your loan file. Handled early, it’s routine. Discovered in the last week of escrow, it’s one of the most common reasons California closings slip. Here’s how lenders treat leased solar, what it does to your qualification, and how to keep it from derailing your closing.
Owned, Financed, Leased, PPA, or PACE? It Matters
The first question I ask is how the system is paid for, because each structure is treated differently:
| Structure | Who owns the panels | How lenders treat it |
|---|---|---|
| Owned outright | Homeowner | Part of the house; standard appraisal, insurance and title rules |
| Solar loan (separately financed) | Homeowner, with a lender’s security interest | Loan payment counts in DTI; a UCC fixture filing may show on title |
| Lease | Solar company | Panels excluded from appraised value; lease payment usually counts in DTI; agreement reviewed |
| Power purchase agreement (PPA) | Solar company | You pay for electricity produced; payments based solely on production can be excluded from DTI |
| PACE financing (e.g., HERO, Ygrene) | Homeowner, repaid through the property tax bill | A priority assessment — Fannie Mae and FHA generally require it paid off at or before closing |
The UCC-1 Filing: What It Is and Why It Shows Up on Title
When a solar company installs leased or PPA panels, it typically records a UCC-1 fixture filing with the county to put the world on notice that it owns the equipment on your roof. The title company picks it up, and the lender has to deal with it before closing. The filing is a claim to the equipment, not a mortgage on your house — but lenders and title insurers still need it addressed. In practice, many solar companies will temporarily terminate the filing so a sale or refinance can close and then re-record it afterward, or confirm in writing how the equipment is treated. Requesting that takes time, which is why it has to start early.
What Fannie Mae Requires for Leased Solar and PPAs
Fannie Mae’s guidelines are the clearest benchmark, and most conventional lenders follow them:
- The lender must get and review the lease or PPA.
- The panels’ value can’t be included in the appraised value or in LTV/CLTV.
- Lease payments count in your DTI, unless the lease guarantees a set amount of energy for a fixed payment and includes a production guarantee that compensates you if output falls short. PPA payments based solely on energy produced may be excluded.
- The home must keep access to another source of electricity (the utility grid).
- The agreement must make the equipment owner responsible for damage from installation, malfunction, defects, or removal.
- The solar company can’t be a named insured or loss payee on your homeowners policy.
- If the lender forecloses, it must be able to terminate the agreement and have the equipment removed, assume the lease, or negotiate new terms.
FHA and VA loans also allow homes with leased solar, but the lender and title company will review the agreement and any recorded filing, and requirements differ by lender. Jumbo, portfolio and non-QM lenders set their own rules — some accept an assumed lease with documentation, others want a buyout. This is where having access to 40+ wholesale lenders helps: I can check each lender’s solar policy before you’re committed to one.
Your Options When the Home Has Leased Solar
1. Assume the lease (transfer). The buyer takes over the remaining term and payments. The solar company runs its own transfer process — usually including a credit check on the buyer — and issues transfer documents. The monthly payment goes into your DTI (unless it’s an excluded PPA).
2. Seller buys out the lease. The seller pays off the remaining obligation before or at closing, the filing is released, and the system conveys with the house. Get a written payoff quote early; the amount depends on the remaining term.
3. Seller pays off the system and conveys it as owned. Where the agreement allows a purchase option, the buyer gets an owned system — the cleanest outcome for underwriting and appraisal.
4. Temporary UCC termination. Often the fastest path on a refinance: the solar company terminates the filing for closing and re-files afterward.
The DTI Impact of Assuming a Solar Lease
A counted lease payment works like a car payment in your debt-to-income ratio. At recent 30-year fixed rates, every $150 a month of lease payment reduces the loan amount you can qualify for by roughly $20,000–$25,000. If you’re near the top of your budget, that can decide whether you qualify — so get the exact monthly payment and escalator terms (many leases increase each year) before you finalize your offer. See how DTI is calculated.
If the Solar Company Went Out of Business
Solar installers do fail. SunPower filed for Chapter 11 bankruptcy in August 2024, and its legacy lease and PPA customers are now serviced by SunStrong Management rather than the company that bought SunPower’s brand. If the company on your agreement no longer exists, track down the current servicer or financing company early — they’re the ones who have to sign the transfer or UCC paperwork.
What to Do in Escrow When You Discover Solar
- Get the full agreement from the seller on day one and confirm whether it’s a lease, PPA, loan, or PACE.
- Start the solar company’s transfer or payoff process immediately — it can take weeks, and it isn’t on the lender’s timeline.
- Confirm your lender’s solar policy before removing contingencies.
- Put the monthly payment in your pre-approval numbers from the start.
- Check the property tax bill for PACE — a PACE assessment usually has to be paid off from escrow.
Selling a Home With Leased Solar
If you’re the seller, pull your agreement and payoff/transfer information before you list. Leased systems can shrink your buyer pool, since some buyers don’t want the payment or can’t qualify with it. Knowing your buyout cost and the transfer process up front lets your agent answer buyers’ questions — and keeps a lender from discovering the filing late in escrow.
Frequently Asked Questions
Can I get a mortgage on a California home with leased solar panels?
Yes. Conventional, FHA and VA loans all allow homes with leased solar or PPAs when the agreement is reviewed and the recorded filing is handled. Under Fannie Mae rules the panels are excluded from the appraised value and the lease payment usually counts in your DTI. Jumbo and non-QM lenders set their own policies, so confirm yours early.
Do I have to buy out the solar lease to get a mortgage?
Usually not. Most agency loans work with an assumed lease or PPA. Some jumbo and portfolio lenders prefer or require a buyout, and a PACE assessment generally must be paid off at or before closing for Fannie Mae and FHA loans.
How does a solar lease affect my mortgage qualification?
Under Fannie Mae guidelines the monthly lease payment is counted in your debt-to-income ratio unless the lease has a fixed-payment and production-guarantee structure, and PPA payments based solely on energy produced may be excluded. At recent rates, each $150 a month of counted payment reduces your qualifying loan amount by roughly $20,000 to $25,000.
What is a UCC-1 filing from a solar company?
It’s a fixture filing the solar company records with the county to show it owns the equipment on your roof. It shows up in the title search and must be addressed before closing — often by the solar company temporarily terminating it and re-filing after closing, or by a lease buyout.
What happens to leased solar panels when a California home is sold?
The buyer either assumes the lease through the solar company’s transfer process, which usually includes a credit check, or the seller pays off the agreement before closing so the system conveys with the house. Start either process at the beginning of escrow.
Does a solar lease hurt my home’s value?
Leased panels can’t be counted in the appraised value for a Fannie Mae loan, and some buyers don’t want to take on the payment, which can shrink your buyer pool. Owned systems are treated as part of the home.
Related Resources
- Debt-to-Income Ratio for California Mortgages
- How Much House Can You Afford?
- Mortgage Refinancing in California
- Mortgage Approval Timeline
- First-Time Home Buyer Guide
- Specialty Property Mortgages
Official Sources & References
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
