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Part 6 – USDA Property Eligibility: Do USDA loans allow homes with a Mother-In-Law Suite?

March 15th, 2024 by Sean Stephens

USDA Property Eligibility: Do USDA loans allow homes with a Mother-In-Law Suite in Florida, Texas, Tennessee, or Alabama?

Can you buy a home with an accessory dwelling unit (ADU) with a USDA loan?

As families continue to search for affordability and review available inventory, we commonly receive scenarios asking whether a USDA loan can be used to purchase a home with an Accessory Dwelling Unit (“ADU”), commonly referred to as a mother-in-law suite, and if that will be considered a USDA eligible property.USDA Property Eligibility: Do USDA loans allow homes with a Mother-In-Law Suite in Florida, Texas, Tennessee, or Alabama?

In today’s short video, we will explain the details and break down how a USDA loan can be used to purchase a home with an Accessory Dwelling Unit throughout Florida, Texas, Tennessee, or Alabama.

Also, don’t forget to take advantage and download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the process step-by-step and is a great tool for both homebuyers and Realtors alike.

Do USDA loans allow homes with a Mother-In-Law Suite in Florida, Texas, Tennessee, or Alabama?

As a starting point, USDA guidelines require that a “qualified property must be predominately residential in use, character, and design” and do not permit “buildings principally used for income-producing purposes” which includes multi-unit properties that are designed to generate income.

With that being said, a home with an Accessory Dwelling Unit, commonly referred to as a mother-in-law suite, can be an eligible property type provided it meets the following USDA definition and guidance:

USDA Loan Accessory Dwelling Unit (“ADU”) Guidelines

An Accessory Dwelling Unit (ADU) refers to a habitable living unit, within, or detached from a single family dwelling, which together constitute a single interest in real estate. The presence of a single ADU does not automatically render the property ineligible.USDA Property Eligibility: Do USDA loans allow homes with a Mother-In-Law Suite in Florida, Texas, Tennessee, or Alabama?

 The appraiser will determine if the ADU represents a second single family housing dwelling unit. The appraiser must consider all property characteristics, specifically the status of the utilities, if they are separate, and the property’s highest and best use, when making this determination. The appraiser will include their evaluation in the site analysis and highest and best use section of the appraisal report, as applicable.

 ADU’s which function in support of the household members, such as multigenerational households are consistent with SFH, however those designed to create a potential rental income stream are not. The expectation would be that those spaces would not be separately metered for utilities or have a separate address.”

 Summary – USDA Loans to purchase a home with a Mother-In-Law Suite

In summary, provided an ADU is in compliance with zoning laws and building codes, a USDA loan can be used for the purchase of property with an

Accessory Dwelling Unit but the appraiser must determine that the property constitutes a single interest in real estate that is there to support the household members and not a second housing unit designed to create an income stream such as a tenant paying rent.

As a USDA Approved Lender, we will walk you through the USDA loan qualifying process step-by-step. Just call, text, or email to discuss your scenario and let us show you the “Metroplex” difference!

Call/Text: 863-593-2001
800-806-9836 Ext. 280
SeanS@MPLX.org

Thank you again for forwarding and sharing today’s video with any friends, family, co-workers, or clients who are looking to buy, sell, or refinance!

As always, I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.

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