Freddie Mac released guidance on June 1st 2022 that allows for rental income to be used for qualifying on ADUs for purchase and non-cashout refinance transactions. Additionally 2-3 units properties that have one ADU (previously it was only single units) are eligible. Furthermore, manufactured homes can also be considered an ADU of a single family home (see guides below). I anticipate that this will help bolster the value of homes with ADU’s as they will be more widely marketable.

Guidelines as of 6/3/2022

Highlights:

RENTAL GUIDES FOR ADUS

Eligible Loan PurposeThe Mortgage must be a purchase or “no cash-out” refinance transaction.
Documentation RequirementsPurchase Transactions Reasonable efforts must be made to determine lease availability, including a review of the appraisal, comparable rent data, purchase contract, a discussion with the Borrower and/or any other applicable and reasonable method.If a lease is available, then:The lease must be used to determine the net rental income, and ADU rental analysis, as described in Additional Appraisal Requirements (in this table), must support the income reflected on the leaseIf a lease is not available, the ADU rental analysis must be used to determine the net rental income.

No Cash-Out Refinance Transactions ADU Placed in Service in Current Calendar Year A lease must be used to determine the net rental income, andADU rental analysis, as described in Additional Appraisal Requirements (in this table), must = support the income reflected on the lease, andThe Mortgage file must contain documentation reflecting the date the ADU was placed in service ADU Owned in Prior Calendar Year The Borrower’s complete federal income tax returns (IRS Form 1040), including Schedule E, for the most recent year must be used to determine the net rental income, except as stated belowA lease and ADU rental analysis, as described in Additional Appraisal Requirements (in this table), may be used if:The property was out of service for any time period in the prior year and the Mortgage file contains a documented event such as a renovation and the Schedule E supports this by a reduced number of days in use and reflects repair costs; orThe property was purchased later in the calendar year and the Schedule E supports this by a reduced number of days in useIn either of the above instances, an ADU rental analysis is required to support the income reflected on the lease.
Lease RequirementsWhen a lease is obtained in accordance with the minimum income documentation requirements above, the lease must be current and fully executed, with a minimum original term of one year. If the lease is documented as assigned from the property seller to the Borrower and is in the automatically renewable month-to-month phase of an original one-year (or longer) term lease, then a month-to-month term is acceptable.
Additional Appraisal RequirementsThe following information on the ADU is required within the appraisal report:Information on the ADU must include the:General condition of unitSquare feet of finished areaTotal number of rooms including number of bedrooms and bathsThe appraisal report must indicate the ADU is allowed per zoning and land use requirements (i.e., legal, legal non-conforming, no zoning)Comparable sales within the Sales Comparison Approach section must include at least one comparable sale with an ADU that is rentedThe rental analysis must include a minimum of three comparable rentals to support the opinion of market rent applicable to the ADU. At least one of the comparable rentals must include a rented ADU to support the market rent for ADUs. The appraiser may provide this rental analysis data in narrative form within the appraisal report or by attaching a separate rent schedule to the appraisal report.
See Accessory Dwelling Units‍  for additional requirements for a property with an ADU.
Net Rental Income Calculation RequirementsThe rental income generated from an ADU may be considered in an amount up to 30% of the total stable monthly income that is used to qualify the Borrower for the Mortgage.The following are requirements for calculating net rental income used for qualifying the Borrower.Lease: 75% of the gross monthly rent or gross monthly market rentADU Rental Analysis: The 25% adjustment is made to compensate for vacancies, operating and maintenance costs and any other unexpected expenses.Schedule E: Calculate the net rental income from Schedule E using Form 92, Net Rental Income Calculations – Schedule E, or a similar alternative form.
Landlord ExperienceFor purchase transactions, at least one qualifying Borrower must participate in a landlord education program prior to the Note Date, or the Effective Date of Permanent Financing for Construction Conversion and Renovation Mortgages, unless the Borrower has a minimum of one year of Investment Property management experience or ADU rental management experience. Landlord education must not be provided by an interested party to the transaction, the originating lender or the Seller. A copy of a certificate evidencing successful completion of the landlord education program must be retained in the Mortgage file.

GENERAL ADU GUIDES

ADUs are permitted when the subject property is a 1-, 2-, or 3-unit property that has one ADU. The dwelling with an ADU must be legal, legal non-conforming (based on the zoning and land use requirements), or located in an area without zoning, however,  an ADUon a 1-unit dwelling that does not comply with zoning requirements may be eligible if the Comparable Property Requirements for ADUs Based on Zoning (below) are met.

Manufactured Home ADU 
Freddie Mac will purchase a Mortgage on a 1-, 2-, or 3-unit property that contains a Manufactured Home ADU that meets the requirements for a property with an ADU and the following:

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