Description
For our season opener, I brought in my go-to mortgage pro, Joe Massey, to break down Fannie Mae’s latest on renovation loans and ADUs. These changes can help more deals pencil—especially for primary residences and house hacks—and give investors a smarter path when HELOCs fall short.
Our guest is Joe Massey, a veteran mortgage lender with 23+ years in residential lending. He focuses on long-term financing for primary homes, rentals, and refis, and partners closely with investors and lenders across the country.
Key Topics Covered
Fannie Mae renovation loans vs. FHA 203k: What’s similar, what’s different, and when each makes sense
Process changes that affect timelines: Why contractor bids and scopes come first (and slow things down)
New initial draw rules: Bigger upfront disbursement—and why it goes to contractors, not you
ADU income eligibility: How rental income now counts for qualification (including on multi-units)
Refi option: Using a renovation loan to add space or an ADU based on after-renovation value
Main Takeaways
Renovation loan basics: You can finance purchase plus rehab based on after-renovation value. Expect a longer runway: you’ll need a scope of work and three contractor bids before the appraisal. Plan on 30–45 days to close.
Bigger day-one funds: The initial construction disbursement is now 50% of the reno budget (up from 20%), paid to your contractor. Lenders will require licensing, bonding, and insurance to reduce risk.
Investor fit: For rentals, expect roughly 25% down on total costs—so this isn’t fix-and-flip money. Hard money still wins when speed and flexibility matter; the Fannie route fits longer holds and primaries.
ADU income now counts: You can use ADU rent for qualification (capped at 30% of total income). New guidance also allows ADUs on multi-units (2–4 units) to count. This can boost buying power for house hackers and long-term investors.
Refi to renovate: If a HELOC won’t cover the budget, a renovation refinance can work because it’s based on the future value, not just current equity.
Timing note: We’ve seen references to a late-March/early-April rollout for these updates, while earlier chatter pointed to 2026. Check with your lender on effective dates in your market.
If this sparked ideas for a current deal, reach out and run the numbers. And if you found this helpful, share it with a friend and leave a quick review. It really helps.
Enjoyed this episode? Please subscribe, leave a 5-star review, and share it with someone who’s planning a renovation or exploring an ADU. Check out related videos on market updates, financing strategies, and investment case studies.
Chapters/Timestamps
00:00 - Introduction
00:42 - Season 6 kickoff + guest intro
02:10 - What changed with Fannie Mae
04:20 - Renovation loan process basics
07:15 - 50% initial draw explained
09:40 - ADU rental income rules
12:30 - ADUs on 2–4 unit properties
15:20 - Renovation refi vs. HELOC + wrap
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