Fannie Mae ADU Guidelines 2026
Rental income qualification, appraisal rules, and what changed with the October 2025 update.
October 2025 Update: ADU rental income now counts for mortgage qualification
Manual underwriting effective immediately. Desktop Underwriter (DU) v12.1 support rolled out Q1 2026. Multiple ADUs (up to 3) recognized under UAD 3.6 as of March 31, 2026.
Quick Facts: Fannie Mae ADU Rules
Rental Income Factor
75% of gross rent
25% vacancy/maintenance deduction
Income Cap
30% of total qualifying income
Cannot exceed 30% of borrower total
Max ADUs Allowed
Up to 3 per property
Effective March 31, 2026 (UAD 3.6)
Eligible Loan Types
Purchase & limited cash-out refi
One-unit principal residence only
Documentation
Form 1007 or lease agreement
Single-Family Comparable Rent Schedule
Property Mgmt
Experience may be required
Depends on underwriting review
How ADU Rental Income Qualification Works
Fannie Mae's updated Selling Guide allows lenders to count rental income from an existing ADU when qualifying borrowers. Here's the step-by-step calculation:
Example Calculation
Documentation Requirements
- 1. Form 1007 — Single-Family Comparable Rent Schedule showing market rent for the ADU, completed by the appraiser
- 2. Lease agreement — Current signed lease if the ADU is already rented (can substitute for Form 1007)
- 3. Tax returns / Schedule E — If claiming existing rental income history
- 4. Appraisal — Must identify the ADU, confirm it meets Fannie Mae's definition, and document its condition
What Qualifies as an ADU?
Fannie Mae defines an ADU as a separate living unit that is subordinate to the primary dwelling. It must include all of the following:
Separate Kitchen
Cabinets, countertop, sink, and stove/range hookup (microwave alone doesn't qualify)
Sleeping Area
Designated bedroom or sleeping space within the unit
Bathroom
Full or three-quarter bath with toilet, sink, and shower or tub
Independent Access
Separate ingress/egress (can be interior or exterior)
Important: Subordinate Size
The ADU must be smaller than the primary dwelling. Fannie Mae doesn't set specific square footage limits — they defer to local zoning — but the unit must clearly be secondary in scale.
Multiple ADUs: UAD 3.6 Update (March 2026)
As of March 31, 2026, Fannie Mae recognizes up to 3 ADUs on a single-unit property under the Uniform Appraisal Dataset (UAD) 3.6 standard. Key details:
Up to 3 ADUs permitted on single-unit properties (total 4 units including primary)
For 2-3 unit properties, total units (primary + ADUs) cannot exceed 4
Rental income still counts from only ONE ADU, even if multiple exist
All ADUs must comply with local zoning or be legal nonconforming
Each ADU is identified separately in the appraisal under UAD 3.6
Eligible Loan Types
| Loan Type | ADU Income Eligible? | Notes |
|---|---|---|
| Purchase | Yes | One-unit principal residence only |
| Limited Cash-Out Refi | Yes | Must be owner-occupied |
| Cash-Out Refi | No | ADU rental income not permitted |
| Investment Property | No | Must be principal residence |
| Second Home | No | Principal residence requirement |
Steps to Qualify Using ADU Income
Confirm Your ADU Qualifies
Verify it meets Fannie Mae's definition: separate kitchen (with stove hookup), sleeping area, bathroom, and independent access. Must be subordinate in size to the primary dwelling.
Get an Appraisal with Form 1007
Order an appraisal that includes a Single-Family Comparable Rent Schedule. The appraiser will determine fair market rent for the ADU based on local comparables.
Document Rental Income
Provide a current signed lease if already renting, or rely on the Form 1007 market rent estimate. Tax returns with Schedule E strengthen the case.
Calculate Qualifying Amount
Your lender multiplies gross monthly rent by 75%, then caps the result at 30% of your total qualifying income. This net amount is added to your income for DTI calculation.
Full PITIA in DTI
The full property payment (principal, interest, taxes, insurance, and HOA) stays in your debt-to-income ratio — the ADU income simply adds to the income side.
Policy Timeline
Selling Guide updated to allow ADU rental income
Manual underwriting effective immediately
Desktop Underwriter (DU) v12.1 released
Automated underwriting now supports ADU income
UAD 3.6 recognizes multiple ADUs
Up to 3 ADUs on single-unit properties
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