What is an ADU Grant ? How you Apply ?
What is an ADU Grant ?
The CalHFA ADU Grant Program will provide as much as $25,000 in assistance to low- to moderate-income homeowners to build accessory dwelling units on their property. Increasing the production of ADUs, also referred to as granny flats, in-law suites or casitas, is one of the latest efforts to ease the affordable housing shortage in the state.
California has an estimated 240,000 ADUs, a tiny fraction of the overall single-family housing supply. But more homeowners – especially those in high-cost areas like the Bay Area and Southern California
Almost 90 percent of California municipalities have adopted ADU-friendly ordinances in recent years, according to the UC Berkeley Center for Community Innovation. Several cities and counties have gone even further, establishing programs that offer financial assistance and/or pre-approved design plans for ADUs.
Who can Qualify for ADU Grant ?
The grants are limited to homeowners earning 80% or less of the area median income.
U.S. citizens and legal residents are eligible for these grants.
Things might get tricky when it comes to income and property qualifying for this grant. For example, Fannie Mae’s Homestyle allows a mortgage for up to 97% of the projected appraised value so long as the loan does not exceed $548,250. Fannie allows a mortgage for up to 95% of the estimated completed value on loan amounts of $548,251 to $822,375 in Los Angeles, San Gabriel Valley and Orange counties.
You will need like-for-like comparable sales to justify the new value, according to Lance Siegel, president of HVCC Appraisal Ordering Service. In other words, there needs to be other recently sold comparable properties with ADUs to use as comps.
The next challenge is the 80% area median income cap. For example, Los Angeles ZIP code 90062 puts that area median income cap at $68,880 (or $5,740 per month), according to Fannie Mae’s website.
You’d be close to the qualifying limit with a $500,000 total mortgage. This new mortgage must include the refinance of any existing mortgage.
Let’s assume your current mortgage balance is $279,500, and it will cost $220,500 to build an ADU, after deducting a $14,000 ADU preconstruction grant. The principal, interest, taxes, and insurance would be $2,536, assuming property taxes of $312 per month and homeowner’s insurance of $150 per month.
Dividing that by the monthly income cap of $5,740 brings you to a debt-to-income ratio of 44.2%. Can you say topping out?
Regardless of the completed property value, a $500,000 loan doesn’t leave much room for most Los Angeles County mortgagors to finance the ADU and still stay under the income qualifying limits.
-Article by Jeff Lazerson
How do you apply for ADU Grant ?
Here is a video by CalHFA of how you can apply for ADU Grant today !
Need more funding for you ADU Project ? Reach out to us at SupportUS@Perfect-Design today ! Not only we are a contractor , we can also provide you with Construction loan !