Accessory Dwelling Units

Whether your borrowers refer to them as guest houses, in-law quarters, casitas, or tiny homes, accessory dwelling units (ADUs) are in demand and can solve for many modern housing concerns. They provide independent living space for family members, an opportunity to house a tenant for rental income or simply extra living space for residents.

Freddie Mac allows the financing of properties with ADUs through all our mortgage offerings, giving your borrowers the flexibility to finance, refinance, build or renovate an accessory dwelling unit.  

Rental income generated on an ADU can even be used as qualifying income, if certain requirements are met.

Key Borrower Benefits 

• ADUs can provide independent housing within a property’s existing footprint, often requiring minimal construction and no additional land.
• ADUs can be a part o the main home, such as a converted basement or above-garage unit, or a detached structure on the main home’s lot.
• Borrowers have the option to apply rent earned from an ADU toward mortgage payments or home upkeep to help sustain homeownership.
• ADUs are a great option for multigenerational households.
• An ADU can allow a homeowner to offer independent living space for relatives or office space to remote employees.
• ADUs may have the potential to increase long-term property and re-sale value.
• Borrowers may be able to use ADU income to qualify for home financing on their subject 1-unit primary residence (Guide Section 5306.3) or non-subject investment property (Guide Section 5306.4).

Key Seller Benefits

• Our ADU guide requirements apply to all Freddie Mac mortgage products and are not limited to our affordable offerings.
• Strong market demand can be met by offering borrowers more financing options on their purchase or renovation of properties with ADUs.
• Borrowers purchasing or refinancing can use Freddie Mac’s CHOICERenovation^® mortgage, to add a new ADU or renovate an existing ADU.
• Financing ADU additions opens another business channel to expand your client portfolio. 

ADU Requirements

• ADUs on 1-, 2- and 3-unit properties must be legally permissible by jurisdiction, legal non-conforming or be located in an area without zoning.
• Exception: An ADU on a 1-unit dwelling that does not comply with zoning requirements (i.e., illegal zoning) may be eligible if the requirements in Guide Section 5601.2(c) are met.

All Freddie Mac Mortgage Products Allow for ADUs