The home lending division of 1st Security Bank will participate in a pilot program it hopes will improve financing options for accessory dwelling units. If successful in pilot, the Bank expects access to this program to expand across the mortgage industry and help borrowers nationwide.

An accessory dwelling unit, or ADU, may be attached to a house or garage but has its own kitchen, living area, and separate entrance. Also known as a mother-in-law or secondary dwelling unit, when the ADU is used as a rental, income from it can be used to offset the mortgage payment, resulting in a lower housing expense for the homeowner.

“Previously, rental income from an ADU did not count as qualifying income for borrowers,” said Donn Costa, executive vice-president of home lending. “This program can significantly increase our borrower’s buying power on home purchases and reduce expenses on cash-out refinances.”

In large metro areas throughout the country, the ADU is being viewed as a critical method for increasing neighborhood density to support mass transportation, provide multi-generational housing options, increase the availability of affordable rental units, and reduce overall costs for homeowners. 

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