California developed an amazing $40K ADU grant that helps low-income families develop the ADUs of their dreams. The reason the state developed the grant was to encourage people to rent out ADUs to provide affordable housing to families struggling with homelessness.
Although the grant is designed to encourage development, it has a few drawbacks, such as the fact that you need a loan from a pre-approved lender to receive the grant. To help you understand this better, we have created a quick CalHFA ADU loan overview.
Loan Types
The four main loan types you can get from pre-approved lenders are:
- Cash-out refinancing
- Home equity loans & HELOCs
- Renovation loans
- Construction loans
Most lenders require you to refinance your current mortgage. This is optimal for individuals who had a bad interest rate to start. However, if you have already locked in a good interest rate, this can be less than ideal.
One lender, CalCon Mortgage, provides a loan that takes a second position. That way you don’t have to refinance your current mortgage. However, it has a $200,000 borrow minimum, which is much too high for a lot of people.
List Of Lenders
The list of approved lenders has grown since the grant was first created. A few approved lenders on their list include:
- Land Home Financial Services
- LoanDepot
- Platinum Home Mortgage Corporation
- Evergreen Home Loans
- Flagstar Bank
Besides the lenders though, there is also a list of special financing grant program participants.
- City of Oakland Keys to Equity Program
- HPP Cares
- NPHS Factory-Built ADU Financing Program
- Pasadena Second Unit ADU Program
- San Diego Housing Commission ADU Financing Program
One of which allows you to get the grant without a loan. HPP Cares allows you to transfer funds that you already have into a managed escrow account and use that to qualify for the ADU grant. That way you don’t need to worry about refinancing your mortgage or borrowing more than you need to.
So, to get the grant you need to take out a loan from the approved lenders, or work with HPP Cares to move funds into a managed escrow.
