Federal ADU Finance Changes from Freddie Mac

Casita Coalition, in partnership with lenders, nonprofits and housing policy leaders, has been working to remove finance barriers that keep ADUs from being built by the families who can most benefit from them. We are pleased to announce some great news from Freddie Mac that finally moves the needle on finance reform and opens up access to financing for more homeowners and homebuyers. So what’s changed - and how will it help?

First, some quick background: Freddie Mac (one of the ‘enterprises’ - the other one is Fannie Mae) was chartered by Congress in 1970 to help support the U.S. housing finance system and ensure a reliable and affordable supply of mortgage funds across the country. They do this by purchasing mortgages from lenders, and by creating specialized loan products for first time homebuyers, lower-income homeowners and others.

Summary of updates announced by Freddie Mac:

  • Homeowners who’ve built an ADU on their primary residence can now use a Freddie Mac Choice Renovation loan for a no-cash-out refinance at favorable terms to pay off the temporary funding source for ADU construction

  • More homeowners will qualify for these Freddie Mac loans because rental income from the ADU can now be part of their qualifying income

  • Loans can now be obtained not just for single homes with an ADU, but also for properties with 1-3 units plus one ADU

  • ADU federal visibility takes a giant leap forward, with the term itself now included in the glossary

Freddie Mac is a major purchaser of home mortgages. If Freddie Mac signals its willingness to purchase mortgages secured by homes with ADUs, and expands the borrower qualification terms, these changes will likely affect the loans and terms that many local banks can offer their customers.

While Casita has more items on our federal ADU finance wish list (for instance, allowing homeowners to use the rental income of a future ADU to help qualify for a loan to build it) this is progress to be thankful for, and to celebrate.

For more details, visit https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/accessory-dwelling-units

Thank you for your support of Casita Coalition and the other organizations that made this possible.

Casita Coalition