Mortgages for ADUs & DADUs in Washington State

ADU and DADU's in Washington stateFinance a backyard cottage, mother-in-law apartment, or rental unit with confidence

Have you been thinking about adding a mother-in-law apartment or backyard cottage to your property? These homes are officially called Accessory Dwelling Units (ADUs) or Detached Accessory Dwelling Units (DADUs)—and thanks to recent zoning changes across Washington State, they’re more achievable than ever.

I help homeowners and buyers understand how to finance ADUs and DADUs, whether you’re building new, renovating, refinancing, or buying a property with ADU potential.

What Is an ADU or DADU?

An ADU is a smaller, self-contained living space located on the same lot as a single-family home. To qualify as an ADU, the unit must be fully habitable and include:

  • A sleeping area
  • A kitchen or cooking space
  • A bathroom
  • Its own entrance, separate from the main home

ADUs can take many forms:

  • A basement or lower-level apartment
  • An apartment over a garage
  • A backyard cottage (DADU)
  • A converted or new manufactured home (where zoning allows)

Why ADUs Are Booming in Washington State

Recent Washington State zoning updates (including HB 1110 and HB 1337) have significantly expanded where ADUs are allowed—sometimes even two units on one property. Many cities have relaxed rules around parking, owner occupancy, and density to encourage more affordable housing options.

Some municipalities are even streamlining the permit process. For example, Renton offers pre-approved DADU plans, helping homeowners save time and money during construction.

Benefits of Adding an ADU or DADU

Adding an accessory dwelling unit can open the door to multiple opportunities:

  • Increase property value by adding livable square footage
  • Create flexible housing for parents, adult children, or guests
  • Generate rental income, including long-term or short-term rentals
  • Offset your mortgage payment with qualifying rental income
  • Age in place with multigenerational living options

In many cases, rental income from the ADU may be used to help you qualify for the mortgage—depending on the loan program.

ADU & DADU Financing Options

There is no one-size-fits-all loan for ADUs. The best option depends on your goals, equity, and how the property will be used. Common financing options include:

 Conventional Loans

  • HomeStyle® Renovation loans
  • Available for purchases or refinances
  • May allow ADU construction costs to be rolled into one mortgage

 FHA & FHA 203(k)

  • Low down payment options
  • Flexible credit guidelines
  • FHA 203(k) allows “all-in-one” purchase or refinance with renovation

VA Loans

  • Eligible veterans may finance ADUs with no down payment
  • Great option for multigenerational living

One-Time Close Construction Loans

  • Ideal for building a new ADU or DADU from the ground up
  • One loan, one closing, one set of costs

Home Equity Options

  • Home Equity Lines of Credit (HELOCs)
  • Fixed-rate second mortgages

Reverse Mortgage (for eligible homeowners)

  • Can be used to add an ADU for family or rental income

Financing is available for both purchases and refinances.

Down Payment & Equity Requirements

Down payment (or equity) requirements vary based on:

  • Occupancy type: primary residence, second home, or investment property
  • Loan program selected
  • Whether the ADU already exists or is being built

Some programs—such as FHA—offer minimum down payment options, while others rely on existing home equity.

Zoning & Property Requirements

Before financing an ADU or DADU, the property must meet local zoning and permitting requirements. The good news is that many Washington cities have relaxed these rules under the new state guidelines.

Let’s Explore Your ADU Financing Options

Whether you’re:

  • Adding an ADU to your current home
  • Buying a property with ADU or DADU potential
  • Refinancing to build or convert additional living space

…I’m happy to help you explore what’s possible.

Here are articles I’ve written on mortgages for accessory dwelling units (attached and detached).

Let’s connect and talk through your goals, your property, and the best mortgage strategy for financing an ADU or DADU in Washington State.