If you are looking to build an ADU yourself or buy a home already containing an ADU, you may be interested in getting an ADU loan. Freddie Mac backs most loan types, meaning you need to meet their regulations to receive a loan for your ADU. So, how do you get a Freddie Mac ADU loan?
Have The Right Property Type
To get a Freddie Mac ADU loan, originally you had to reside on a single-family property. However, now your property can have up to 3 homes on it and you will still be able to qualify as long as the total number of units on the property does not exceed four. This of course applies if you are looking to use a loan to build an ADU on your property.
Buying A House With An ADU
If you are buying a home that already contains an ADU, you can receive money in the form of an ADU to put towards your purchase if you intend to rent the ADU out. The stipulations are that the ADU must comply with local zoning laws and land use requirements. In other words, the ADU must be legal and up to code. If the ADU is a manufactured home, it is only allowed under specific conditions.
An appraiser will have to come to inspect the property and determine how much the ADU is worth to determine what loan amount you can qualify for. They will do this by looking at the general condition of the unit, how big it is, and seeing what an ADU of a comparable size rents out in the local area.
Rental Income Requirements
There are stipulations to using rental income to qualify for an ADU loan. The first one is that rental income cannot exceed 30% of the total income used to qualify. Therefore you still need to have a good chunk of money coming from other sources besides your rental income to qualify for most loans.
The second stipulation is that rental income documented with a lease cannot exceed 75% of the lease amount
How to Increase Your Chances of Getting a Freddie Mac ADU Loan?
If you’re interested in getting a Freddie Mac ADU loan, you can do a few things to increase your chances of approval. First, make sure you have a solid credit score and history. Lenders want to see that you are responsible with credit and can make timely payments. It would help if you also had a steady income to cover the monthly mortgage payments for your primary residence and the ADU.
Additionally, it’s essential to have a detailed plan for your ADU project. It includes a realistic budget, construction plans, and timelines. Having a detailed plan shows lenders that you are serious about your project and have the plan to pay back the loan. Consider getting pre-approved for a loan before you start your ADU project. It will give you a better idea of how much you can afford to borrow and your monthly payments.
Finally, working with a reputable lender with experience with ADU loans is important. They can guide you through the application process and provide valuable advice to help you get approved. With these tips, you can increase your chances of getting a Freddie Mac ADU loan and make your ADU project a reality.
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