Accessory Dwelling Unit (ADU) FAQ

Yes. Freddie Mac requires an ADU to have a separate entrance. Freddie Mac considers an ADU to be an additional living area that is independent from the primary dwelling unit and includes at least a kitchen, a bathroom, and a separate entrance.

Independent in this context refers to the ADU as being self-contained and having its own separate entrance. An ADU may share utilities and common walls with the primary dwelling unit.

Freddie Mac defines a kitchen as a dedicated area where food is stored, prepared, and cooked. We do not prescribe what type of appliance is required for cooking food (i.e., stove, microwave oven).

No. Freddie Mac does not require an ADU to have a bedroom. Freddie Mac will provide financing for properties where the ADU is an efficiency unit.

When the primary dwelling unit is a 2- or 3-unit property, the ADU living area must be subordinate (smaller) in size to the combined living area of the 2- or 3-unit property.

The physical features of a 1-, 2- or 3-unit property with an ADU and a 2-, 3- or 4-unit property can be very similar. To help differentiate these configurations, it is important to assess their characteristics and physical features. Typically, ADUs are created through conversion of an existing garage, basement or attic space, may be attached or detached, and are inferior in size to the primary dwelling unit. By contrast, 2-, 3- or 4- unit properties are generally constructed at the same time and contain similarly sized independent units that have separate utilities, unique postal addresses and are rented.

Additional factors that also need to be considered that differentiate a 1-, 2- or 3-unit property with an ADU from a 2-, 3- or 4-unit property are the zoning and land use requirements, the unit’s utility, and the property’s highest and best use. If there is uncertainty with respect to these differentiations, contact the appraiser to discuss the specific property characteristics.

No. A defining factor of an ADU is its independence from the primary dwelling unit. In this scenario, the basement is not fully independent since access to the primary dwelling unit is not restricted, providing no means of privacy.

No. An ADU is a living area independent of the primary dwelling unit that has a separate entrance.

The appraiser's analysis must be documented in the appraisal report and conclude whether an adjustment is supported for the ADU. If the analysis of comparable data (i.e., comparable sales, contract or pending sales and/or current listings) with an ADU indicates there is no market reaction to an ADU in that market area, the appraiser may reflect no value for the ADU. However, to simply ignore the ADU due to a lack of comparable sales is not an acceptable appraisal practice. The appraisal report must justify and support the appraiser’s analysis and conclusions.

No. Freddie Mac does not prescribe what determines the decommissioning of an ADU. Guide Section 5601.2 provides the requirements for determining if an additional living area is an ADU.

Freddie Mac will purchase a mortgage secured by a 1-unit subject property with an ADU that does not comply with the zoning and land use requirements (illegal zoning) if at least two comparable sales, each with an illegal ADU, are included on the appraisal report to demonstrate the marketability of the subject property to its market area. The additional requirements of Guide Section 5601.2 (c) must also be met.

No. A mortgage secured by a 1-, 2- or 3-unit property with more than one ADU is not eligible for sale to Freddie Mac. Additionally, a 4-unit property with one or more ADUs is not eligible.

Yes, the property would still be considered a primary residence.

The answer depends on whether the subject property has 1, 2 or 3 units. When the subject property is a 1-unit and the appraiser provides two comparable sales, each with an ADU that does not comply with zoning and land use requirements, the mortgage would be eligible for sale to Freddie Mac. These comparable sales are required to demonstrate the marketability of the subject property to its market area. When the mortgage is secured by a 2- or 3-unit property with an ADU that does not comply with zoning and land use requirements, the mortgage would not be eligible for sale to Freddie Mac.

This property configuration may be eligible provided the Seller’s review determines the property meets our eligibility requirements. The Seller is responsible for determining the eligibility of the property and the acceptability of the appraisal report. The appraiser must consider zoning and land use requirements when determining if the subject property has an ADU. The appraiser must also consider the property's highest and best use, when making this determination.

Yes. Although Form 1000 is generally used for the comparable rentals of the subject property, it may be used for the ADU comparable rentals to support market rent. The appraiser may also attach their own comparable rent schedule or provide the same rental analysis data within the narrative section of the appraisal report to support the market rent.

Yes. Freddie Mac will purchase a mortgage secured by a 1-, 2- or 3-unit property that has a manufactured home ADU that meets the Guide requirements for both the manufactured home and the ADU. However, a manufactured home may not be an ADU for a mortgage secured by another manufactured home unless the mortgage is secured by a Freddie Mac CHOICEHome^® mortgage.

Yes. However, the ADU must be either site-built or modular and may not be another manufactured home, unless the primary residence is a CHOICEHome.

No. At this time rental income is allowed only on an ADU subject 1-unit primary residence.

We do not prescribe specific documentation requirements; however, examples may include a copy of Schedule E or a lease.

No, rental income from the main dwelling may not be used at this time.

For the rental income to be used for establishing the debt payment-to-income ratio used when qualifying the borrower, the income must be received at the time mortgage payments are due. If the lease does not require monthly rental income payments to begin before or on the date the first mortgage payment is due, for example due to an ADU undergoing construction or renovation, the projected rental income cannot be used for qualifying purposes as the monthly income calculation will be inaccurate.

When entering rental income from an ADU, Sellers should select Accessory Unit Income under the Income Type data point (ID #258), as detailed in the Loan Product Advisor v5.1 Data Specifications.

Yes. LPA returns a purchase restriction message, indicating the ADU income amount submitted and the 30% of total monthly income amount.