Home Ready financing with ADU

1 Reply

Hey I was wondering if anyone had experience with using ADU income to qualify for a home ready loan. My questions include:

Was the ADU income income just passed through the DU program or manually evaluated?

Do you have to use the ADU's income or can I live in the ADU and claim the primary houses rental income?

What are the major hurdles in trying to buy a house this way?

Thanks!!

Originally posted by @Jeffrey K. :

Hey I was wondering if anyone had experience with using ADU income to qualify for a home ready loan. My questions include:

Was the ADU income income just passed through the DU program or manually evaluated?

Do you have to use the ADU's income or can I live in the ADU and claim the primary houses rental income?

What are the major hurdles in trying to buy a house this way?

Thanks!!

 Hi Jeffrey,

You've done your homework well! HomeReady is one of the few niche mortgage products that'll unambiguously count ADU income from a property you are buying. Here are answers directly from fanniemae.com: https://www.fanniemae.com/content/fact_sheet/homer...

Just to set your expectations, rental income from the ADU (no, you living in the ADU will not mean that rent from the main house gets counted) will certainly move the needle, but it isn't going to move that needle a lot. And if the home is in a census tract with an income limit, the rental income counts there too & might push you over. Those are a few potential hurdles.

Non owner occupied rental income math (pure investment) is far more generous than owner occupied rental income math (hybrid primary residence / investment).

I've had pushback from appraisers when I've ordered the rent schedule for an ADU. The AMC I use is now up to speed on it, but for the first few I actually uploaded exactly that link above with stars and circles around the "Note" at the bottom just to show them that I wasn't making things up. Most agents and appraisers, and lenders for that matter, have no idea this hyper niche product has this feature. I don't think you will get very far with a 1-800 number lender.

Good luck!

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

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