Historically, rental income generated from an ADU on a 1-unit Primary Residence could be considered for Mortgage qualification only when the Borrower had a disability and the rental income was from a live-in aide, or when the Mortgage was a Home Possible® Mortgage. That has changed.
Recently, Freddie Mac has updated their requirements to allow rental income generated from an ADU on a subject 1-unit Primary Residence to be considered when qualifying the Borrower for a purchase or a "no cash-out" refinance Mortgage, provided that certain requirements are met, including but not limited to:
The ADU must comply with zoning and land use requirements (legal, legal non-conforming or no zoning)
An appraisal report must be obtained to support the ADU's marketability and include at least one comparable sale with an ADU that is rented. If an automated collateral evaluation (ACE) appraisal waiver is offered, it must not be accepted.
The appraiser's rental analysis must include a minimum of three comparable rentals that support the market rent of the ADU, and at least one of the comparable rentals must be a property with an ADU
The Seller must ensure that the ADU rental income used to qualify the Borrower for the Mortgage does not exceed 30% of the total stable monthly income
At least one qualifying Borrower must participate in a landlord education program or have previous landlord experience for a minimum of one year
This is great news, as it expands a borrowers ability to use rental income from the subject property to qualify for a home. If you have any questions about this - reach out to us anytime! We are here to help in any way that we can! - DL