FHA Seeks Feedback on Proposed Changes to Increase Access to Affordable Financing for Properties with Accessory Dwelling Units
Industry Update
April 13, 2023
Source: U.S. Department of Housing and Urban Development
The Federal Housing Administration (FHA) published for feedback a draft update to its requirements for insuring mortgages on single family homes with Accessory Dwelling Units (ADUs). The proposal adds additional flexibility in calculating market rent and in using ADU rental income to qualify for FHA-insured mortgage financing. If finalized, these updates would allow more borrowers to qualify for FHA financing for properties with ADUs, including 203(k) renovation loans. FHA’s action today advances the goals of the Biden-Harris Administration’s Housing Supply Action Plan.
“FHA is at the forefront of the Administration’s efforts to increase housing supply and affordability,” said Federal Housing Commissioner Julia Gordon. “At a time when housing supply is constrained and ADUs are gaining popularity nationwide, an updated policy has the potential to expand opportunities for low- and moderate-income homeowners to benefit from the wealth building potential of ADUs while supporting the affordable housing needs of their communities.”
ADUs are small units of housing built inside, attached to, or on the same property as a primary residence. FHA programs currently allow for the purchase, rehabilitation, or refinance of properties that include ADUs. FHA does not, however, currently allow for the inclusion of rental income from the ADU in the borrower’s qualifying income.
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