Loosening ADU Restrictions

Sawyer: Hi, I'm Sawyer and welcome to the lowdown on ADUs.

[Intro]

Appraiser: Back again, Carl. Back to get this thing appraised finally. Right there. What does that say? Separate entry. Where is it? Let's see your separate entry, huh? No!

Carl: Oh, there you are. Thanks for waiting. You know, that's probably the easiest way into the building.

Appraiser: The garage didn't work. What makes you think this is gonna work, Santa? What else you got? Let's just go. I gotta go. Are you trying to sell me on a bedroom here, Carl? 

Carl: Up here. You know how long it took me to get this up here? It's a combo kitchen bedroom unit.

Appraiser: Definitely not meeting the ADU criteria.

Carl: Wait. One more thing. I know they call these mother-in-law units for a reason. There's someone I want to introduce you to come on.

Carl: Hey, mom there's someone I'd like you to meet. It's our appraiser.

Mother-in-law: What a wonderful ADU this is Carl. You are my favorite son.

Carl: Stop recording

[End skit scene]

Sawyer: Recently Freddie Mac did something kind of interesting. They released a guideline update for some specific changes to how they look at accessory dwelling units or ADUs. This is typically a home with a basement apartment or maybe even a room over a garage that's rented out to earn income. The apartment or room must have things like a separate entrance a kitchen with a stove and a sink a bathroom, etc. In order to actually be considered a true ADU, in the past both Fannie and Freddie have only allowed ADUs on one unit homes. But as these types of properties are becoming more popular, Freddie decided to go ahead and change their guidelines to allow for an ADU to be part of a two to three unit property. This would be something like a duplex with a basement or attic that's converted to have a separate entrance in a kitchen. Another exciting change is that Freddie now allows the rental income from ADUs to be used to qualify for a mortgage loan though there are some limitations. Only one unit homes with an ADU can use rental income to qualify, and if the borrower happens to live in the ADU they may not use the rental income from the main property to qualify at least at this time. It's also important to note that these appraisals on these types of properties can get a bit tricky as the appraiser will need to find comparable properties with an ADU. Also, the property will still need to comply with zoning and land use requirements in order to be eligible to sell the loan to Freddie Mac. As of the day this was released Fannie Mae's guidelines are still more restricted regarding ADUs, though they may soon follow suit in the near future. In the meantime, we wanted to share this new development with you so you can provide the most up-to-date information to your borrowers. And for more training like this, check us out at knowledgecoopplus.com

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