ADU Income Can Be Used to Qualify HECM Borrowers

ADU Income Can Be Used to Qualify HECM Borrowers

The Department of Housing and Urban Development updated its financial assessment guidelines to permit income from Accessory Dwelling Units (ADUs) to be used in qualifying older homeowners for an FHA-insured Home Equity Conversion Mortgage.

Details were provided in Mortgagee Letter 2023-17, which took immediate effect.

“FHA recognizes that ADUs can serve to enhance the generational wealth-building potential of homeownership,” says ML 23-17. “Additionally, ADU rental income can contribute to Mortgage Payments and help Borrowers sustain long-term homeownership. To support the goals of increasing the stock of affordable housing and expanding opportunities for wealth building and homeowner stability, FHA is updating its appraisal protocols, underwriting requirements, and HECM financial assessment guidelines to permit the inclusion of income from an ADU in the Borrower’s Effective Income for purposes of qualifying for FHA-insured mortgage financing.”

For more details, read ML 2023-17.

Published by

Darryl Hicks

Darryl Hicks is Vice President of Communications for the National Reverse Mortgage Lenders Association. In this capacity, Hicks writes for NRMLA's publications, manages the association's web sites and social media accounts, assists committees and the Board of Directors, and manages the Certified Reverse Mortgage Professional designation. Prior to joining NRMLA in 1999, Hicks spent three years in the Washington, D.C. bureau for National Mortgage News.