Today the FHA amended its policy to allow lenders to count a portion of income from Accessory Dwelling Units (ADUs) as part of the borrower's income. ADUs are small units of housing that can be attached to a primary residence (like a garage that has been modified as a separate unit) or can be a free-standing unit on the same property.
In the past the FHA didn't allow this income to count toward qualifying for a loan but in hopes of addressing the ongoing affordable housing shortage they made this change. The new policy allows borrowers to:
- Use 75% of the estimated rental income from an existing ADU to qualify for a mortgage
- Use 50% of the estimated rental income from a new ADU they plan to attach to an existing structure (like a garage or basement conversion) to qualify for an FHA mortgage
- Take advantage of expanded FHA mortgage options for new construction, which now include ADUs
This is great news for first-time buyers who are struggling to get into the housing market and often go with an FHA loan. For more information check out this article in today's mortgage report.