What we verified in “Buying a duplex or a home with an ADU to live with family”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to HUD Handbook 4000.1, FHA's single family programs are limited to one- to four-unit properties that are the owner's principal residence; a one-unit property with a single accessory dwelling unit (ADU) remains a one-unit property; a two-unit property has two individual dwellings; a three- to four-unit property has three or four dwellings, or two or three dwellings plus an ADU; and for two to four units the lender must obtain form HUD-92561.

   Sources 1 · Handbook 4000.1, II.A.1.b, Property Types: 'FHA's Single Family programs are limited to one- to four-family Properties that are owner-occupied Principal Residences'; 'A one-unit Property is a Single Family residential Property with a single Dwelling Unit, or with a single Dwelling Unit and a single ADU'; 'A two-unit Property is a Single Family residential Property with two individual Dwelling Units'; 'a Single Family residential Property with two individual Dwelling Units and one ADU or three individual Dwelling Units and one ADU'; 'The Mortgagee must obtain a completed form HUD-92561' · Checked October 17, 2026

2. According to HUD Handbook 4000.1, an accessory dwelling unit (ADU) is a single habitable living unit with its own means of entry and exit, smaller than the main home, that can be added to, created within or detached from a one-unit home and together with it forms a single interest in real estate; a one-unit home with one ADU remains one unit, but on a property with two or more units an additional dwelling counts as another unit.

   Sources 1 · Handbook 4000.1, II.A.1.b, Accessory Dwelling Unit: 'refers to a single habitable living unit with means of separate ingress and egress'; 'An ADU is a private space that is subordinate in size'; 'which together constitute a single interest in real estate'; 'A Single Family residential one-unit Property with a single ADU remains a one-unit Property'; 'a separate additional Dwelling Unit must be considered as an additional unit' · Checked October 17, 2026

3. According to HUD Handbook 4000.1, a principal residence is where you live permanently for most of the year, and you can have only one; on an FHA loan, at least one borrower must move in within 60 days of signing and intend to live there for at least one year; and FHA will not insure a loan if the transaction was designed to use FHA insurance to obtain investment properties.

   Sources 1 · Handbook 4000.1, II.A.1.b.iii, Occupancy Types: 'A person may have only one Principal Residence at any one time'; 'At least one Borrower must occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year'; 'designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties' · Checked October 17, 2026

4. According to HUD Handbook 4000.1, on an FHA loan rent from the home you are buying can count as income when it is a one-unit home with an ADU or a two- to four-unit property; for two to four units the lender documents the rent with an appraisal showing fair market rent and any leases; if you have no rental history, it uses 75 percent of the lesser of the appraiser's market rent or the lease rent; ADU rent counted as income cannot exceed 30 percent of your total qualifying income; and the lender may not subtract that rent from your mortgage payment.

   Sources 1 · Handbook 4000.1, II.A.4, Rental Income Received from the Subject Property: 'Rental Income from the subject Property may be considered Effective Income when the Property is or will be a one-unit dwelling with an ADU, a two- to four-unit dwelling'; 'obtaining an appraisal showing fair market rent'; 'the Mortgagee must use 75 percent of the lesser of'; 'fair market rent reported by the Appraiser'; 'the rent reflected in the lease or other rental agreement'; 'must not exceed 30 percent of the total monthly Effective Income used to qualify the Borrower'; 'The Mortgagee may not reduce the Borrower's total Mortgage Payment by the net subject property Rental Income' · Checked October 17, 2026

5. According to HUD Handbook 4000.1, on a three- or four-unit property the principal, interest, taxes and insurance payment divided by the net self-sufficiency rental income may not exceed 100 percent; that net income uses the appraiser's market rent for all units, including yours, minus the greater of the appraiser's vacancy and maintenance estimate or 25 percent of market rent.

   Sources 1 · Handbook 4000.1, II.A.1.b, Self-Sufficiency Rental Income Eligibility: 'The PITI divided by the monthly Net Self-Sufficiency Rental Income may not exceed 100 percent for three- to four-unit Properties'; 'using the Appraiser's estimate of fair market rent from all units, including the unit the Borrower chooses for occupancy'; 'or 25 percent of the fair market rent' · Checked October 17, 2026

6. According to HUD Handbook 4000.1, the lender must verify reserves equal to three months of payments (principal, interest, taxes and insurance) after closing on three- to four-unit properties, and two months on a one-unit home with an ADU if rental income is used to qualify.

   Sources 1 · Handbook 4000.1, II.A.4, Reserves: 'Reserves equivalent to three months' PITI after closing for three- to four-unit Properties'; 'Reserves equivalent to two months' PITI after closing for one-unit with an ADU Properties' · Checked October 17, 2026

7. According to HUD Handbook 4000.1, when one or more borrowers will not live in the property, the maximum loan is 75 percent of value; it can rise to 96.5 percent if the borrowers are family members, except on a two- to four-unit property or when a family member sells to another who will be a non-occupying co-borrower.

   Sources 1 · Handbook 4000.1, II.A.2.b, LTV Limitations Based on Non-Occupying Borrower Status: 'For Non-Occupying Borrower Transactions, the maximum LTV is 75 percent'; 'The LTV can be increased to a maximum of 96.5 percent if the Borrowers are Family Members'; 'a transaction on a two- to four-unit Property' · Checked October 17, 2026

8. On form HUD-92561, signed on two- to four-unit FHA properties, the borrower agrees not to rent any part of the home for transient or hotel use while the loan is FHA-insured; HUD defines that use as any rental for less than 30 days, or any rental with hotel services such as room service, maid service or linens.

   Sources 2 · Form HUD-92561, Borrower's Contract with Respect to Hotel and Transient Use of Property: 'The Secretary has defined the term transient or hotel'; 'any rental for a period less than 30'; 'customary hotel services such'; 'Borrower, his/her successors and assigns, will not rent, offer' · Checked October 17, 2026

9. According to HUD's FHA mortgage limits page, you can look up FHA limits by state, county or metropolitan area, and limits for multiple-unit properties are fixed multiples of the one-unit limits.

   Sources 3 · FHA Mortgage Limits: 'This page allows you to look up the FHA or GSE mortgage limits for one or more areas'; 'Limits for multiple-unit properties are fixed multiples of the 1-unit limits' · Checked October 17, 2026

10. Under the National Housing Act, the maximum FHA loan amount is figured separately for a 1-family home and for a 2-, 3- or 4-family home, according to the size of the residence.

    Sources 4 · 12 U.S.C. §1709(b)(2)(A): 'in the case of a 1-family residence'; 'in the case of a 2-, 3-, or 4-family residence'; 'for a residence of applicable size' · Checked October 17, 2026

11. According to Fannie Mae's Selling Guide, a principal residence is the property the borrower occupies as their primary residence; with multiple borrowers, only one must occupy and take title to the property; Fannie Mae treats as owner-occupant a child buying to house parents who are unable to work or lack sufficient income to qualify on their own; and the same for parents or guardians buying for a disabled adult child in that situation.

    Sources 5 · Selling Guide B2-1.1-01, Occupancy Types (10/05/2022): 'A principal residence is a property that the borrower occupies as their primary residence'; 'Only one borrower must occupy and take title to the property'; 'Children wanting to provide housing for parents'; 'If the parent is unable to work or does not have sufficient income to qualify for a mortgage on their own, the child is considered the owner/occupant'; 'Parents or legal guardian wanting to provide housing for their handicapped or disabled adult child' · Checked October 17, 2026

12. According to Fannie Mae's Selling Guide, an ADU is an additional living area independent of the main home, with living, sleeping, cooking and bathroom facilities, on the same parcel; only one ADU is allowed per parcel and none with a two- to four-unit dwelling; it must be smaller than the main home; whether a property is one unit with an ADU or two to four units depends on its characteristics, such as separate utility meters, a unique postal address and whether the unit can be legally rented, as determined by the appraiser; an ADU is considered legal if current zoning allows it; and if zoning does not allow it, the property may still be eligible under additional conditions.

    Sources 6 · Selling Guide B2-3-04, Special Property Eligibility Considerations (10/08/2025), Accessory Dwelling Units: 'The ADU must provide for living, sleeping, cooking, and bathroom facilities and be on the same parcel'; 'Only one ADU is permitted on the parcel of the primary one-unit dwelling'; 'ADUs are not permitted with a two- to four-unit dwelling'; 'The ADU must be subordinate in size to the primary dwelling'; 'the existence of separate utility meter(s), a unique postal address, and whether the unit can be legally rented'; 'The appraiser must determine compliance with this definition'; 'An ADU should always be considered legal if it is allowed under the current zoning code'; 'the property is eligible under the following additional conditions' · Checked October 17, 2026

13. According to Fannie Mae's Selling Guide, rent from the home you buy can be used if it is a two- to four-unit principal residence or a one-unit home with an ADU; on a purchase, the lender multiplies monthly gross rent by 75% and subtracts the full property payment (principal, interest, taxes, insurance and dues); if you have less than 12 months of rental management experience and the result is positive, it can only offset that payment; and for an ADU, only rent from one existing ADU counts, only on purchases or limited cash-out refinances, and up to 30% of your total qualifying income.

    Sources 7 · Selling Guide B3-3.8-02, Rental Income from the Subject Property (09/02/2026): 'two-to four-unit principal residences'; 'one-unit Accessory Dwelling Unit (ADU) allowed with a one-unit primary residence only'; 'the lender must multiply monthly gross rent by 75% for the net rental income amount, then subtract the PITIA of the subject property'; 'When the borrower has less than 12 months of rental property management experience'; 'the lender may use the rental income to offset the PITIA only'; 'Rental income is only allowed from one existing ADU'; 'Purchase or limited cash-out refinance transactions only'; 'The qualifying rental income amount from the ADU is limited to 30% of the total qualifying income' · Checked October 17, 2026

14. According to Fannie Mae's Selling Guide, rent from the unit the borrower occupies in a two- to four-unit property generally cannot be used to qualify; and lenders may only use positive rental income as qualifying income if the borrower has at least 12 months of property management experience.

    Sources 8 · Selling Guide B3-3.8-01, General Rental Income Information (09/02/2026): 'the unit the borrower occupies in a two- to four-unit property'; 'cannot be used to qualify the borrower'; 'Lenders may only use positive rental income for qualifying income if the borrower(s) has at least 12 months of property management experience' · Checked October 17, 2026

15. According to Fannie Mae's Selling Guide, loans evaluated with Desktop Underwriter require six months of reserves for a two- to four-unit principal residence purchase.

    Sources 9 · Selling Guide B3-4.1-01, Minimum Reserve Requirements: 'DU will determine the reserve requirements based on the following'; 'Six months' reserves for the following: a two- to four-unit principal residence transaction' · Checked October 17, 2026

16. According to the CFPB, lenders can charge slightly more for loans to buy a condo, a home with more than one unit (for example, a duplex) or a manufactured home.

    Sources 10 · Request and review multiple Loan Estimates (page last modified Jul. 14, 2025): 'Lenders can charge slightly more for loans to buy a condo, a home with more than one unit (for example, a duplex), or a manufactured home' · Checked October 17, 2026

17. According to IRS Publication 527, in most cases you must include in gross income all amounts you receive as rent; if you rent part of your property, you must divide certain expenses between the rented part and the personal-use part, as if they were two properties, and expenses for the rented part, such as mortgage interest and real estate taxes, are deducted as rental expenses on Schedule E; a fair rental price is generally what someone unrelated to you would pay; and a day a family member lives in the unit counts as personal use, unless they use it as their main home and pay a fair rental price.

    Sources 11 · Publication 527 (2025), Residential Rental Property: 'In most cases, you must include in your gross income all amounts you receive as rent'; 'If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes'; 'as rental expenses on Schedule E (Form 1040)'; 'A fair rental price for your property is generally the amount of rent that a person who isn't related to you would be willing to pay'; 'unless the family member uses the dwelling unit as their main home and pays a fair rental price' · Checked October 17, 2026

18. Under the Fair Housing Act, the discrimination ban in section 3604, other than its subsection (c), does not apply to rooms or units in dwellings where no more than four families live independently, if the owner lives in one of them.

    Sources 12 · 42 U.S.C. §3603(b)(2): 'Nothing in section 3604 of this title (other than subsection (c)) shall apply to'; 'rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence' · Checked October 17, 2026

19. Under the Fair Housing Act, it is illegal to make, print or publish any notice, statement or advertisement about renting a dwelling that indicates a preference, limitation or discrimination based on race, color, religion, sex, disability, familial status or national origin.

    Sources 13 · 42 U.S.C. §3604(c): 'To make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin' · Checked October 17, 2026

20. According to the IRS, the VITA and TCE programs offer free basic tax return preparation to qualifying people; available services can vary at each site depending on its certified volunteers; and many sites help taxpayers with limited English.

    Sources 14 · Free tax return preparation for eligible taxpayers: 'offer free basic tax return preparation to qualified individuals'; 'Available services can vary at each site due to the availability of volunteers certified'; 'Limited English-speaking taxpayers' · Checked October 17, 2026

21. HUD-approved housing counselors give independent advice on buying, renting, defaults and credit, often at little or no cost.

    Sources 15 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'they can offer independent advice, often at little or no cost to you' · Checked October 17, 2026