Freddie Mac is one of the biggest secondary market financing companies. Their regulations surrounding ADUs are important for everyone to know since your ADU financing options are mostly through them. Therefore, it is important to know these key aspects of Freddie Mac ADU regulation.
What Properties Can Develop ADUs
Properties containing anywhere from one to three units can receive a loan to build an additional dwelling unit. In their original regulations, only single-family residencies could qualify for a loan to build an ADU. However, now as long as the total number of units on the property does not exceed 4, you can qualify for an ADU loan through Freddie Mac.
Use Rental Income To Qualify
One of the most exciting aspects of the Freddie Mac ADU regulations is that you can use expected future rental income generated by the development of the ADU to qualify for a loan to build it. In other words, if you are trying to finance your ADU and currently don’t make enough money to qualify for the loan you need to cover all your ADU costs, you can factor in your predicted future income from renting out the ADU to meet the qualification.
The ability to use future rental income to qualify also allows you more buying power when purchasing property containing an ADU already. It also gives you more buying power to purchase a property where you intend to build an ADU. As long as you rent the unit out, you can qualify for a larger loan to secure the property.
Stipulations To Rental Income
There are stipulations to using future rental income towards qualifying for a loan. For starters, the ADU on the property must be legal. That is also necessary if you intend to build an ADU on your property. The unit must meet all codes and regulations.
Secondly, you must have an appraiser come and inspect the property to ensure it is up to code and determine how much it can be rented out for. They have to describe the general condition of the unit, look at how much other units in the area rent out for and draw up a report.