Episode 5 - What Can You Do With an ADU?
“Not only can a renter help you pay your mortgage, they can help you qualify for a bigger home.” - Nelson Barss
Can an ADU Help You Qualify for a Bigger Home?
If you’ve been house-hunting in Utah lately, you’ve probably seen homes advertised with an ADU, or accessory dwelling unit. These are sometimes called basement apartments or mother-in-law suites — essentially a separate living space within your property that you can rent out.
ADUs have become one of the smartest tools for first-time homebuyers in Utah who want to make their mortgage more affordable and qualify for a higher purchase price. We’ve helped many clients successfully use this strategy to get into their first homes — even when prices seemed out of reach.
How an ADU Can Help You Qualify
When you buy a home with an ADU (or a duplex, triplex, or fourplex), lenders can count part of the rental income toward your qualifying income. Here’s how it works:
You must live in one unit for at least a year.
The appraiser estimates the rental value of the other unit(s).
75% of that rental income can be added to your qualifying income.
You don’t need a signed lease before closing — just the appraiser’s estimate.
For example, if your ADU could rent for $1,500 per month, $1,125 (75%) can count toward your income. That boost could raise your qualifying amount by tens of thousands of dollars, helping you move from a $335,000 approval to something closer to $400,000–$500,000 — a major difference in Utah’s market.
Loan Options for ADU and Multi-Unit Homes
The good news is you can use standard residential loans for up to four units:
FHA loans: As little as 3.5% down if you’ll occupy one unit.
Conventional loans: Only 5% down for owner-occupied multi-unit properties.
Anything above four units is considered commercial, which means higher down payments (typically 20–25%) and different loan structures.
This flexibility opens the door for Utah buyers to start small — a duplex, triplex, or fourplex — and use rental income to offset their mortgage.
Using a Renovation Loan to Add an ADU
Sometimes the perfect home doesn’t come with a ready-to-rent ADU — but that doesn’t mean you’re out of options. Renovation loans let you finance the remodel costs right into your purchase mortgage.
That means you could buy a $350,000 home and borrow an additional $50,000 to add a separate entrance, kitchenette, or small basement apartment — creating your own ADU and a future stream of rental income.
Many lenders shy away from renovation loans, but we handle them regularly. We’ve helped Utah buyers transform fixer-uppers into long-term investments, often starting with just 3.5% down.
Real Success Stories
We’ve seen firsthand how this strategy changes lives for Utah homeowners:
A young family in Bountiful purchased a home with an ADU, encouraged by their realtor who now helps many of her clients use this same strategy.
A first-time buyer in Ogden bought a fourplex, lived in one unit, and gradually renovated the others — turning it into a profitable long-term investment.
Another buyer in Logan used an FHA renovation loan to convert a Victorian home into a triplex — renting out two units while living in the third.
Each story shows that with the right plan, owning a home — even a multi-unit one — isn’t just possible, it can be life-changing.
Ready to See What’s Possible for You?
If you’ve been thinking about buying a home in Utah, especially if you’re curious about using rental income to qualify, it’s time to talk strategy. A quick, free pre-approval consultation with our team can show you exactly how much home you can afford — and how an ADU could make it easier than you think.
If you haven’t started with our basecamp episodes and you’d like a walk through of the entire home buying process and the benefits of owning a home, start here with Basecamp 1.