PHILADELPHIA — A new federal housing policy will make it easier for some buyers to qualify for a mortgage by allowing them to include rental income from accessory dwelling units in their application.
The Federal Housing Administration announced Monday that under a new policy it will allow lenders to consider income from accessory dwelling units when underwriting a mortgage. Rental income from the ADU will be included in the borrower’s qualifying income.
The policy change “will allow more borrowers to qualify for FHA financing for properties with ADUs,” the FHA said in a press release.
“This not only helps more people qualify for mortgages and build wealth, but it also helps increase supply in neighborhoods where housing is least available,” said Assistant Secretary of Housing and Federal Housing Commissioner Julia Gordon at the Mortgage Bankers’ Association’s annual press conference. conference Monday.
An ADU is generally considered a smaller housing unit located on the same lot where the main house is located, such as a granny flat. ADUs can be rented to tenants on a short- or long-term basis, which can provide a similar source of income as if the owner of a multifamily unit lives in one unit and rents out the others to pay the mortgage.
For homeowners wishing to add an ADU, 50% of the unit’s estimated rental income will be used to qualify for a mortgage loan under the FHA’s standard 203(k) Rehabilitation Mortgage Insurance program. “This will allow more homeowners with limited income to build ADUs, helping them maintain homeownership and increasing the production of ADUs as rental housing,” the FHA said.
For homeowners looking to purchase a property with an existing ADU, the new FHA policy allows 75% of the ADU’s estimated rental income to count toward their ability to qualify for an FHA-insured mortgage.
The FHA also said it would include ADU-specific appraisal requirements, so appraisers can capture the estimated rents the unit can generate.
“FHA-approved lenders may begin offering borrowers mortgages on properties with ADUs under the new policies effective immediately,” the agency said.
Mark Fleming, chief economist at First American, said the FHA’s decision to include rental income from an ADU is similar to what borrowers face when taking out a mortgage for a multifamily unit. “Why would an accessory dwelling unit be somehow treated differently? It’s a source of income for that owner,” he said.
2023-10-16 22:35:24
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