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FHA To Increase Access To Affordable Financing For Properties With Accessory Dwelling Units, Seeks Feedback On Proposed Changes

The use of affordable FHA-insured financing for homes is going to be expanded, especially for the ones with dwelling units by way of proposed policy changes.

April 13, 2023

Washington- The Federal Housing Administration (FHAs) is planning to insure mortgages on single-family homes with accessory dwelling units (ADUs) and has published a draft for feedback for the same. The proposed update introduces more flexibility in determining market rent and allows the use of rental income from Accessory Dwelling Units (ADUs) to qualify for FHA-insured mortgage financing. Once it gets finalized, the borrowers will be allowed to qualify for FHA financing for ADU properties including 203(K) renovation loans.

Julia Gordon said, “FHA is at the forefront of the Administration’s efforts to increase housing supply and affordability. At a time when housing supply is constrained and ADUs are gaining popularity nationwide, an updated policy has the potential to expand opportunities for low- and moderate-income homeowners to benefit from the wealth-building potential of ADUs while supporting the affordable housing needs of their communities.”

Accessory Dwelling Units (ADUs) are compact housing units constructed within or attached to a primary residence’s property. While the Federal Housing Administration (FHA) permits the purchase, renovation, or refinancing of properties with ADUs, rental income from ADUs is presently not considered part of the borrower’s qualifying income according to FHA regulations.

The draft named Mortgagee Letter contains the full set of proposals for public feedback on FHA’s single-family housing drafting table web page. The maximum time to send the feedback is April 27, 2023.

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The content provided in this article draws inspiration and includes quotes from various reputable sources, including news articles, government data, and interviews. Affordable Housing 411 strives to ensure accuracy and credibility, but the information presented may be based on some external sources. We encourage readers to refer to the referenced materials for more in-depth insights and verification.

Department of Housing and Urban Development. “Federal Housing Administration Seeks Feedback On Proposed Changes To Increase Access To Affordable Financing For Properties With Accessory Dwelling Units”. HUD, April 13, 2023,
Federal Housing Administration Seeks Feedback on Proposed Changes to Increase Access to Affordable Financing for Properties with Accessory Dwelling Units | / U.S. Department of Housing and Urban Development (HUD)

Last Updated: September 20, 2021