Accessory Dwelling Units
Having an accessory dwelling unit (ADU) on an existing property has become a popular way for homeowners to offer independent living space to family members or to gain residual income by renting out the unit. This popularity has increased demand for home financing that offers special consideration for an ADU.
Freddie Mac’s ADU policies provide multiple options for adding an ADU to a home or financing a purchase with the intention to rent or build an ADU, including allowing the borrower to use rental income to qualify. Our policies allow you to offer ADU flexibility on any Freddie Mac mortgage, giving your customers more choice in the purchase or renovation financing process.
Key Borrower Benefits
- An ADU can allow homeowners to offer independent living space to parents, adult children or other family members for less than if they supported a separate living situation.
- Residual income from renting out an ADU can contribute to mortgage payments and property maintenance to help sustain homeownership.
- ADUs are usually smaller and more affordable to build than standalone residential properties and have the potential to increase property value in an amount much greater than their cost.
- ADUs typically have a smaller environmental footprint—they require fewer materials to build and less energy to heat and cool, and they conserve land since they’re built on a lot with an existing property.
Key Lender Benefits
- Our expanded ADU policy supports all Freddie Mac mortgage products and is 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.
- With the use of Freddie Mac’s CHOICERenovation℠ mortgage, a homeowner can renovate their existing residence to add an ADU or make an ADU renovation part of their home purchase transaction.
- Financing ADU additions opens another business channel as refinancing slows.
Who is an ADU for?
- Homebuyers wishing to purchase a home with space to rent for residual income.
- Homeowners who want family members to reside with them but would like to offer a separate residence.
- Borrowers renovating their property to add an ADU.
This Bulletin announces updates to ADUs, AIM, desktop appraisals, Condominium and Cooperative Projects, attorney opinion of title letter, Area Median Income, certificate of incumbency and wire and automated clearing house instructions, and more.
The information on this page is not part of, and is not a replacement or substitute for, the requirements found in the Freddie Mac Single-Family Seller/Servicer Guide and your other Purchase Documents.
Accessory Dwelling Unit Requirements
- Property Type/Eligible Properties
- One ADU is allowed on 1-, 2- and 3-unit properties.
- A 1-, 2- or 3-unit property with an ADU must comply with the zoning and land use requirements for the jurisdiction in which it’s located. Acceptable zoning classifications include legal, legal non-conforming or locations with no zoning.
- Exception: An ADU on a 1-unit property may have illegal zoning under certain conditions.
- ADUs that are manufactured homes are allowed under certain conditions.
- Eligible Mortgage Products
Any Freddie Mac mortgage offering is eligible, provided the mortgage meets all underwriting requirements for that offering.
- Loan Purpose
- Purchase
- No cash-out refinance
- Special Requirements
Appraisal Requirements
- The comparable sales requirements for properties with an ADU differ depending on whether the property complies with the zoning and land use requirements. Refer to Single-Family Seller/Servicer Guide (Guide) Section 5601.2 for acceptable zoning classifications and conditions.
- Refer to ADU rental income requirements in Guide Section 5306.3 for comparable sale and comparable rental requirements when rental income from an ADU on the subject 1-unit primary residence is used to qualify.
- The comparable sales requirements for properties with an ADU differ depending on whether the property complies with the zoning and land use requirements. Refer to Single-Family Seller/Servicer Guide (Guide) Section 5601.2 for acceptable zoning classifications and conditions.
- Special Requirements
Using Rental Income from ADU on 1-Unit Primary Residence to Qualify the Borrower
See the ADU fact sheet for more information, and Guide Section 5306.3 for specific detail.
- Special Requirements
Additional Requirements
- For rental income requirements for an investment property, refer to Guide Section 5306.4.
- For rental income requirements for a Home Possible® Mortgage, refer to Guide Section 4501.9.