Erik,We need to make a few adjustments to your numbers:- Your closing costs will be closer to 1.5% of the purchase price, or $10,500.- Property taxes in LA County are closer to 1.27%, making the mostly cost closer to $740.- There's only 1 water meter on the property, which means you'll be paying for that.

According to Freddie Mac, the most popular 30-Year fixed rate increased to 2.88% (but still below the 3.00% benchmark), the 15-Year fixed rate increased to 2.44%, and the 5/1 adjustable rate increased to 2.9%.

This plan will adjust depending on the specific property and how much work is needed.

My mortgage was an adjustable rate one, so it was a struggle for me as it went up.

Here is a good article to reference:https://www.buildinganadu.com/cost-of-building-an-adu The costs in the article are from ADU builds in Portland, OR, so be sure to adjust for that. 

First question is will they count W2 income from gross or adjusted gross from tax documents?

There are no tax implications except for some state transfer tax, if any. if fmv has gone down, hopefully not. the basis needs to be adjusted. 

You'll definitely have to lower your screening standards to match the demographic out there, but stick to those standards despite how low you need to adjust them. 

The point is, you adjust your bid for these things to where if everything went completely wrong, and you win, you are happy.  

We have seen a handful of our clients have success this year, but we have had to re adjust expectations.