Cleaner Mortgage Credit Report Pricing This is a behind‑the‑scenes change that can help your wallet…
ADUs: Fannie Mae Update
Fannie Mae Now Lets Some ADU Rent Help You Qualify for a Mortgage
Accessory Dwelling Units can turn a home into a smarter financial move. Fannie Mae’s latest update allows certain borrowers to count a portion of ADU rent toward qualifying income. That can lift buying power on a one-unit primary home with an ADU in PA or FL, as long as you follow the rules.
What changed
Fannie Mae now allows ADU rental income to be used for qualifying on a one-unit primary residence if it’s a purchase or limited cash-out refinance. Only one ADU’s rent can be counted, and the amount you can use is capped at 30% of your total qualifying income. Lenders can apply this right away with manual underwriting; Desktop Underwriter will be updated in Q1 2026 to recognize ADU income automatically.
Quick example
- Your base qualifying income is $6,000/mo
- Market rent on the ADU is $1,200; lenders usually count 75% ($900) for qualifying
- $900 is 30% of $3,000, but we’re adding it to $6,000. The cap says ADU income used can’t exceed 30% of your total. With $900, your total becomes $6,900 and the $900 used is within that 30% cap.
We’ll run the math precisely for your scenario, including taxes, insurance, and any HOA.
What documentation looks like
Expect normal rental-income documentation: a lease supported by a Comparable Rent Schedule (Form 1007) or tax returns if there’s rental history. Lenders typically use 75% of market or lease rent to account for vacancy and expenses when it’s a recent rental, or the amount from tax returns for past rentals. We’ll line up the paperwork so the underwriter has what they need the first time.
Boundaries to know
- Applies only to one-unit primary residences
- Purchase and limited cash-out refi only
- One ADU counted even if more exist
- 30% cap on how much ADU rent you can use in qualifying
- DU support comes Q1 2026; manual underwrite eligible now
We’ll confirm the property truly meets Fannie Mae’s ADU definition and that local zoning or “legal nonconforming” status is handled correctly.
Bonus update: rental income reported on business returns (Form 8825)
Fannie Mae also aligned documentation when rental income flows through partnership or S-corp returns:
- If you only receive rental income via Schedule K-1, lenders now need just the most recent one-year business return for income reported on Form 8825 (matching the one-year rule used for Schedule E).
- All rental income on 8825 is now treated as self-employment income, regardless of whether you personally owe the related mortgage.
Lenders are encouraged to use this now and must do so for applications dated on or after Feb 1, 2026.
This is a practical win for self-employed or pass-through investors, cleaner asks, fewer extra returns.
Another win: more allowable cash back on limited cash-out refis
On limited cash-out refinances, Fannie Mae raised the maximum cash back to the greater of 1% of the new loan’s UPB or $2,000. This gives borrowers a little breathing room for proration quirks and escrow true-ups without blowing eligibility. Effective immediately.
What this means for buyers and homeowners in PA & FL
- Buyers of one-unit homes with ADUs can put a slice of rent to work, within the 30% cap, potentially lifting purchase power.
- Current owners doing a limited cash-out refi may be able to use ADU income (subject to the same rules) and benefit from the higher cash-back ceiling.
- Self-employed or pass-through investors see cleaner rental-income doc requirements tied to business returns, which can speed underwriting.
How we help (and keep it simple)
- Price across 30+ lenders to keep your options broad and your rates
- Clarity first – We listen, map your goals, and translate guidelines into plain English so you know exactly what to expect.
- Numbers you can trust – We build side-by-side scenarios with payment, cash to close, and breakeven. No surprises, just clear decisions.
- Smart structure, not just rate – We optimize points, lender credits, and mortgage insurance to lower total cost over your expected time in the home.
- Documentation made simple- You get a tailored checklist and help clearing conditions fast. We keep the file clean so closing stays on track.
- Local guidance – Estimates use realistic taxes, insurance, and HOA for your county. We coordinate with your agent and title from offer to keys.
- Proactive communication – You get updates at each step and quick answers when something changes. We protect your time.
Final thoughts
If you are eyeing a one-unit home with an ADU, this rule change turns potential rent into real qualifying power. The lift is not unlimited, and the 30% cap matters, but used correctly it can widen your price range without stretching your budget. Success comes down to clean definitions, clean documents, and clean math.
For buyers and homeowners in Pennsylvania and Florida, the takeaway is simple: this is a practical tool, not a loophole. When the ADU meets the definition and the documents line up, the math can legitimately improve your qualifying numbers. We will verify eligibility, build side-by-side estimates, and shop multiple lenders to keep your options broad with competitive rates. If you want a quick read on your scenario, send the property address and a target payment range, and we will map your next steps.