Why this matters before you apply
Many homeowners assume that once an ADU is built, its rental income will automatically help them qualify for a larger loan or refinance. In practice, whether and how much of that income counts depends on the specific loan program, the type of appraisal used, and whether the unit is already built and rented or still just planned.
Existing ADU vs. proposed ADU — a real difference
- An existing, already-rented ADU generally has an easier path — lenders can often use documented lease income or a market-rent estimate from an appraiser, similar to how they'd evaluate any rental property.
- A proposed ADU that doesn't exist yet is harder to underwrite, since there's no lease and no finished unit to appraise. Some loan programs allow a projected market rent from an appraiser to be counted, but often only a portion of it, and only for certain loan types.
How lenders typically discount projected rent
Even when projected rental income is allowed, lenders commonly count only a percentage of it — frequently in the neighborhood of 75%, though this varies by program and lender — to account for vacancy, maintenance, and management costs that reduce actual cash flow. This "haircut" is standard underwriting practice for rental income generally, not unique to ADUs.
This varies by lender — don't assume a specific number
Because underwriting guidelines differ by loan program (conventional, FHA, and others) and by individual lender overlays on top of those guidelines, the exact percentage counted and the documentation required varies. Ask any lender you're considering directly: do you count projected ADU rental income, how much, and what documentation (appraisal form, lease, etc.) do you require?
What documentation is typically involved
- An appraisal with a rental schedule (sometimes called a Form 1007 or similar rent schedule) showing the appraiser's opinion of market rent for the unit.
- A signed lease, if the unit is already built and occupied.
- Permit and completion documentation, confirming the ADU is a legally permitted unit — unpermitted structures generally aren't eligible for this treatment. See our guide to legalizing an unpermitted ADU if that applies to your property.
How this connects to your financing choice
Whether projected rental income can be counted at all often depends on which financing path you're using in the first place. See our HELOC vs. construction loan comparison and ADU financing overview for how the major options generally work — and ask about rental income treatment specifically within whichever program you're considering.
Frequently asked questions
Sometimes, depending on the loan program and lender — an appraiser's market rent estimate may be used, though often only a discounted portion of it counts toward qualifying income. Ask your specific lender directly what their program allows.
Generally no — lenders typically require the unit to be a legally permitted structure to count its rental income. See our legalization guide if you have an existing unpermitted unit.
It varies by lender and program — a portion is commonly discounted to account for vacancy and expenses. There's no single universal figure, so ask your specific lender for their program's treatment.