Four ways to fund your ADU.

ADU financing — frequently asked

• What financing options work for a Puget Sound ADU?

  Four main paths: (1) Fannie Mae HomeStyle Renovation / Freddie Mac CHOICERenovation — 30-year fixed, underwritten on as-completed value, ~6.8–7.2% in late 2025; (2) FHA 203(k) Standard — for FHA-eligible borrowers, ~6.5–6.9%; (3) HELOC against existing equity — prime+0.25 to prime+1.0 variable; (4) cash-out refinance — 30-year, ~6.7–7.1%. Each city's financing page walks through which lenders are active locally.

• Can I get one loan that covers both my home and the ADU?

  Yes — that is what HomeStyle and CHOICERenovation do. The loan refinances your existing mortgage and includes ADU construction cost in a single 30-year fixed obligation underwritten on as-completed appraised value. You make one payment after construction, not separate mortgage + construction loan + permanent take-out.

• Which lenders are most active for ADU loans in Washington?

  BECU, Sound Credit Union, WSECU, Washington Federal, Banner Bank, Umpqua Bank, JPMorgan Chase, and several smaller community lenders are currently writing HomeStyle and CHOICERenovation loans for Puget Sound ADUs. Rates vary 0.25–0.5% across these lenders; underwriting flexibility on the contractor side varies more. We can intro you to 2–3 active LOs.

• Do I need a down payment?

  For HomeStyle/CHOICERenovation: yes, typically 5–10% of as-completed value if owner-occupied primary residence, 25% if investment property. For HELOC: no down payment but you need existing equity (usually ≥30% post-build). For cash-out refi: depends on resulting LTV, typically capped at 80% as-completed.

• How does a construction draw schedule work with a lender?

  Lender holds the construction funds in escrow and releases on an 8-draw schedule matching the AIA G702/G703 we use. Each draw requires a third-party inspector visit ($150–$300 per draw, typically paid by borrower at closing). Inspection confirms the % complete; lender wires funds to us within 3–5 business days. Total inspection cost over an ADU: $1,200–$2,400.

• What's the cheapest way to finance an ADU?

  Cash, if you have it and the opportunity cost is acceptable. Next: HELOC at prime+0.25 if you have substantial existing equity. HomeStyle is more expensive (0.5–1.0% above HELOC) but rate-locks for 30 years instead of floating with prime. For most homeowners with limited cash, HomeStyle is the cheapest path to keys despite the higher rate, because the alternative is borrowing high-rate personal debt.

• Will the bank require my contractor to be approved?

  Yes for HomeStyle, CHOICERenovation, and 203(k). The lender will request the contractor's license (we provide GOLDNAB882L2), bond, insurance, references, and recent project list. We have been pre-approved by all the major Puget Sound ADU lenders — typical approval turnaround is 5–7 business days for a first-time lender relationship, same-day for repeat lenders.

• Can I use a HELOC if my home is in a trust?

  Yes, with a trust certification and sometimes a trust amendment. Lenders will typically request the trust agreement, the trust certification, and confirmation that the trustee has authority to encumber. Add 2–3 weeks to closing if the trust is uncommon (irrevocable, multi-grantor, out-of-state). Common revocable living trusts are routine.

• Are there government grants for ADU construction?

  Federally, no general grants — but the federal residential clean energy credit (IRC §25D) covers 30% of solar PV + battery cost added to a new ADU through 2032. Washington offers limited DCYF grants for ADU construction by certified family-childcare providers. Several cities pilot grant programs (Seattle Backyard Cottage pilot fund, ~$50K per unit, oversubscribed).