Accessory Dwelling Units What you Need to Know
There is a Growing Trend in Housing Called “Accessory Units” or “Accessory Dwelling Units.” (ADU) This allows others to live on your property, yet each person has their own space. If you have adult children or aging parents at home, this may be a good option. Many cities will also allow renters in your ADU as long as the home owner also lives in the property. Home loan lenders are recognizing this trend and have recently updated guidelines to assist homeowners.
Many of my first-time-buyer clients have adoped a strategy of searching only for homes that have an ADU or that can be easily renovated to include one. It can be a great way to make home ownership affordable and sustainable in today’s market.
Our family recently completed the addition of a detached garage with an apartment above it. We used a renovation mortgage to finance this project.
How to finance an ADU addition
We offer conventional and FHA mortgages designed for remodel projects. Renovation costs can be added to your mortgage on a refinance or a purchase, and borrowing limits can be as high as 97% of the AS COMPLETED appraised value. This means you can borrow more than the purchase price and complete the remodel after closing.
What is an Accessory Unit?
An Accessory unit or dwelling is typically an additional living area that is independent of the primary dwelling itself. It may have been added to, created within, or detached from the primary dwelling.
When Financing a Home, what standards are required for a home loan?
An Accessory Unit must provide for living, sleeping, cooking, and bathroom facilities on the same parcel as the primary one-unit residence. However, some loan programs will allow an accessory unit on 2–4-unit properties.
Here are some of the Basic Requirements:
The accessory unit must be smaller than the primary home.
There must be a separate entrance
The kitchen in the unit must have cabinets, a countertop, a sink with running water, and a stove or stove hookup.
There must be a sleeping area.
Bathroom Facilities and a bathing area are required.
A manufactured home that is permanently affixed to the property sometimes qualifies.
Allowed zoning for accessory units.
Here are some examples of an Accessory Unit – Note that ALL must have a separate entrance!
A living area over a garage.
A living area in a basement.
Small Addition to the primary dwelling.
Manufactured Home if it is titled as real property.
Considering Purchasing, Renovating, or Refinancing a home for an Accessory Dwelling Unit? Let’s Talk!