The LO Down - Loosening ADU Restrictions

Posted by Sawyer Jones on June 29 2022

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.


In the past, Fannie and Freddie only allowed ADUs on 1-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 2-3 unit property. This would be something like a duplex, with a basement or attic that is converted to have a separate entrance and kitchen. 


Another exciting change is that Freddie now allows the rental income from the ADU to be used to qualify for a mortgage loan.  Though there are some limitations:

  • Only 1-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 this time. 


It’s also important to note that appraisals on these types of properties can be 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.


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Tags: Mortgage, REALTORS



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