Have you been considering a “mother-in-law” apartment or backyard cottage? This type of dwelling is technically referred to an accessory dwelling unit aka “attached dwelling unit” (ADU) or detached dwelling unit (DADU).
An ADU is a smaller living space on the same lot as a single-family home. It must be a habitable living unit including space for sleeping, cooking and a bathroom with it’s own entrance (independent of the primary residence). An ADU could be an apartment over the garage; in the basement of the primary residence; a detached home in the back yard; or even a manufactured home.
Recent changes to zoning laws in Washington state (HB 1110 and HB 1337) allows more homes to have an ADU (or two!). In many areas, regulations for ADUs have been eased to help promote the addition of accessory dwelling units in the spirt of creating more affordable housing.
Adding an ADU to your home can provide a lot of options, including increase value by adding more living space. An ADU also provides additional space for when family or friends come to visit; or if you need housing for a parent or adult children. They can also provide additional income as an investment property or short-term-rental. Rental income may be factored for qualifying purposes.
There are several options available for financing an ADU/DADU, including:
- Conventional – HomeStyle Renovation
- FHA and FHA 203(K)
- VA
- One-Time Close Construction Loan
- Home equity lines of credit or fixed rate second mortgages.
- Reverse Mortgage
Financing is available for purchases or refinances.
Different down payment (home equity) requirements are based on the occupancy (primary, second home or investment property). Some programs, like FHA, have minimum down payment options.
The property must meet zoning requirements, which in many cities has been relaxed with the new zoning laws. Some cities, like Renton, actually have pre-approved DADU plans to help make the permit process more efficient.
If you have been thinking about adding an additional housing unit to your existing home or buying a new home with potential for an ADU, let’s connect to see what’s possible!
An “offset mortgage” also known as an “all-in-one loan” is basically a 30-year home equity line of credit that includes a sweep-checking account where the deposits go directly to paying the principal balance. Homeowners can still access the funds they deposit (and their home equity) from the account, using it to pay their day-to-day bills, vacations, home improvements, whatever the credit line has available. It is essentially a “normal” checking account. 
The FHFA announced today that the pricing of mortgage interest rates for second homes or high balance mortgages will be more expensive. This impacts conventional mortgages (Fannie Mae and Freddie Mac) and is effective for loans that are delivered on or after April 1, 2022 – i.e. I expect to see the price increases to start happening soon. 
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