I can probably get 2.5 since the loan will be conforming and no longer jumbo.I like the the index fund, assuming this is low risk, because I can generate enough income to pay for 3 to 4 months of the mortgage.

I hope I am conforming with the guidelines of this forum as I am asking for information.

So I guess this is both a word of caution when building an ADU until Fannie Mae updates their conforming guidelines, as well as a question to anyone out there who knows of "non-conforming" or loans with good rates for this type of situation that aren't sold to Fannie Mae/etc. 

Legal entities are not eligible for conforming residential loans. 

This is a stellar rate for a non-conforming loan.

The Excel in the folder says I have to use it every time, but other online sources seem to say that I only need to use it if it is applicable (e.g. the unit is in a flood zone).The form itself is also a bit confusing (though it appears to conform word-for-word with the statutory requirements) - it is missing a third choice which is "The Premises is not located in a special flood hazard area or area of potential flooding"Do I always include it, and if so, do I just tick the box for "Landlord has no actual knowledge as to whether the Premises is located in a special flood hazard area or an area of potential flooding."

State tax laws may not conform to federal.

A: If by non-conforming do you mean illegal units, for example a legal 2 unit building with 4 rental units, then yes the banks care and they might even ask you to remove anything that is illegally there (stoves, gas lines that are hooked up to furniture and appliances, etc) and they will not use the rental income of the illegal units in the appraisal. 

Conforming residential loans require min 1yr owner occupation (unless its an "investment" conventional).As I recall, the USDA Rural development program lends on putting up the development. 

A traditional, conforming loan will probably not be a good fit.