Non-traditional ADU financing options?

[Hemant Karira]

Team - We plan to 'BUILD' an ADU in our backyard needed to know if there are any "Non-Traditional ADU financing options" out there? Eventually we plan to rent the ADU for Medium or Long Term rental, and not sure if DSCR loan will qualify for such an arrangement. Please let me know. Thank You!

[Matthew Porcaro]

Quote from @Andres Murillo:

Quote from @Hemant Karira:

Team - We plan to 'BUILD' an ADU in our backyard needed to know if there are any "Non-Traditional ADU financing options" out there? Eventually we plan to rent the ADU for Medium or Long Term rental, and not sure if DSCR loan will qualify for such an arrangement. Please let me know. Thank You!

I know a lot of folks have used 203k loans to finance ADU builds. They'll use an "after construction value" to base your LTV on. Plenty of lenders have access to this loan but aren't really marketing it as an "ADU Loan".

This is correct, a lot of the FHA guidelines have changed in the last year making ADU financing a lot more acceptable and easier. You can do brand new builds on ADU's and you can use 50% of the future income from that ADU to increase your approval amount.

Fannie Mae HomeStyle does this as well. 

Caveat is these are owner occupant loans.