Mortgage Lenders Can Now Count Income from ADUs When Underwriting FHA Loans


Mortgage lenders can now count income from accessory dwellings when underwriting Federal Housing Administration (FHA) loans.

The new policy aims to “help households of more modest means maximize the potential benefits of homeownership to build wealth,” says Julia Gordon, assistant secretary for housing and federal housing commissioner for the U.S. Department of Housing and Urban Development, in a statement. “This new policy also contributes to the supply of affordable housing in many neighborhoods where it’s most needed and least available.”

The new rule allows lenders to count income from small units of housing built inside, attached to, or on the same property as a primary residence.

By allowing the inclusion of rental income from the accessory dwelling unit (ADU) in the borrower’s qualifying income, more borrowers will be able to qualify for FHA financing.

The new rule – which supports the Biden-Harris administration’s Housing Supply Action Plan – will also help incentivize more homeowners to provide more private rental housing.

“Increasing the supply of affordable housing and helping families to create generational wealth is what today’s action making it easier to finance an accessory dwelling unit is all about,” says HUD Secretary Marcia L. Fudge. “This is a part of our work to help address the critical shortage of affordable housing in communities across the country and help people increase the value of their homes. The Biden- Harris Administration is committed to increasing the housing supply so that more people have access to quality housing that they can afford so that their families can thrive.”

The FHA defines an ADU as a single habitable living unit with a means of separate ingress and egress that meets the minimum requirements for a living unit.

The new policy allows 75% of the estimated ADU rental income for some borrowers to qualify for an FHA-insured mortgage on a property with an existing ADU.

Photo: Travel-Cents

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