FHA Loans


The U.S. Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA) rolled out a new policy in late October expanding accessing to FHA mortgage financing for homes that include Accessory Dwelling Units (ADU).

Lenders may now consider income from ADUs when underwriting mortgages.

Why It matters in DC

House Hacking is popular in expensive cities like Washington DC, and ADUs are a common entrée to investing. These accessory dwellings are separate spaces built inside, attached to, or located on the same property as a primary residence.

In the past, rental income from ADUs was not typically considered in FHA mortgage underwriting. Now, effective immediately,  FHA borrowers in DC will have greater flexibility in financing this type of property.

HUD’s stated goal is to allow existing rental income for ADUs and prospective rental income to be included in the underwriting process so more borrowers can purchase properties with ADUs, rehab existing houses to add ADUs, and construct new homes with ADUs,, according to HUD’s Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon, who spoke at the 2023 Mortgage Bankers Association Annual Conference.

The new policy allows borrowers to:

  • Use 75% of the estimated rental income from an existing ADU to qualify
  • Use 50% of the estimated rental income from a new ADU to be attached to an existing structure to qualify
  • Take advantage of expanded FHA mortgage options for new construction, which now include ADUs

Specific Appraisal Requirements

ADU-specific appraisal requirements consider the primary residence and the ADU’s income-generating capabilities. Ask your lender for the details.

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