FHA just came out with a new policy that will allow lenders to use rental income from accessory dwelling units (ADU’s). The policy change was done to help increase homeownership opportunities and help with affordable housing.
ADU’s are small units of housing that can be built inside or attached to the same property as your home. In Minneapolis, there are garages that are being used as ADU’s (sometimes it’s a 2nd floor of a garage), others are building ADU’s in their basements.
In the past an ADU was not commonly used in income qualifying so this will help buyers when it comes to qualifying for a home. It will also help those looking to rent a smaller place.
The new policy allows a borrower to:
- Use 75% of the estimated rental income from an existing ADU to qualify
- Use 50% of the estimated rental income from a new ADU they plan to attach to an existing structure
- Take advantage of expanded FHA mortgage options for new construction which now allows ADU’s.
There will be some new appraisal requirements specific to ADU’s. The requirements will help to assess the value of a property with an ADU and the income potential.
The policy is effective immediately. FHA is hoping this will help borrowers be able to qualify for homes and also help offset housing costs.
For those thinking about adding an ADU to their home, this could help you finance a home. And for those that are looking at buying a home that has an ADU, it could help you offset the cost of the payment!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
