ADU Finance Option for new property

[Teacha Wong]

I need some advise on the best option for financing my ADU build, I just bought my home in January 2020, so HELOC and similar loans I will not get approved for because equity in my home is not yet large enough, I need some concrete options that I could explore to get funding. Any advice on the best option for a loan to finance my build.

[Whitney Hill]

• If you don’t have equity in your house, but your current loan value is less than $550K ⇒ a Homestyle Renovation Loan could cover the construction of the ADU by using the future value of the property with the ADU, up to a total loan value on the home of $701K (e.g. if you already have a $500K mortgage on the house, there is potential to get a $200K renovation loan for the ADU construction)
• If you don’t have equity in your house but you have a FICO score of 720+ ⇒ you could consider a 2nd Position Construction Loan that will cover the building costs (and is not limited on loan value like the Homestyle option). Once the ADU is completed, you can refinance into a single loan.