Can Casita or Guest House Rent Help You Qualify for a Mortgage?
Fannie Mae now lets rent from a casita, guest house or converted garage count toward qualifying income on a one-unit home you will live in. Debbie explains who the rule covers, the 30% cap on that income, why only one accessory unit counts, and how permitting and the appraisal decide the outcome.
If the home you are looking at has a casita, a guest house or a converted garage, the rent from that unit may now help you qualify. Fannie Mae announced the change in October 2025 and built it into Desktop Underwriter, its automated decision engine, on March 21, 2026. In this episode Debbie explains which properties the rule covers, how much of the rent actually counts, and why permitting and the appraisal decide the outcome — after a two-minute update on the Federal Reserve rate decision that landed the same afternoon.
Straight answers from this show. Each one links to the moment in the video where it is explained, and each carries the date it was given.
Can rent from a casita or guest house help you qualify for a mortgage?
Yes, on a Fannie Mae loan. Rent from an accessory dwelling unit, meaning a casita, a guest house or a permitted garage conversion, can count toward qualifying income when you are buying a one-unit home you will live in, or doing a limited cash-out refinance on one.
Fannie Mae announced it in October 2025 and put it into Desktop Underwriter on March 21, 2026, so the guideline is established policy rather than a change that happened this month. The property has to be a single-family home on title, and it has to be a home the borrower will occupy. A casita, a guest house, a detached unit built in the backyard or a garage converted into a separate living space can all be the accessory dwelling unit. Where the property is on title as a two-, three- or four-unit building, the ordinary rental income guidelines apply instead. Debbie Marcoux points out that the older rule allowed none of that rental income, so an accessory dwelling unit that sat empty of qualifying value now has some. The transaction also matters: purchase or limited cash-out refinance, not a cash-out refinance.
As of the live show on September 16, 2026. Fannie Mae guidelines change; confirm current eligibility with a lender before relying on the income.
Source: Debbie Marcoux, NMLS #237926, JMJ Financial Group, NMLS #167867, on Mortgage Mom Radio (September 16, 2026).
How much of the casita rent actually counts toward your income?
Up to 30% of your total qualifying income, and no more, however high the rent is. That cap is measured against your own income rather than against the lease, which is what makes this different from the way rental income is treated on an investment property or a departing residence.
Fannie Mae caps accessory dwelling unit income at a share of total qualifying income, so a high rent on the casita does not translate into a matching jump in buying power. Debbie Marcoux draws the contrast with other rental income on air: for an investment property, or a home a borrower is leaving and renting out, the calculation starts from the lease or the market rent and offsets the payment on that property. The accessory dwelling unit calculation starts from the borrower's own income instead. Only one accessory unit counts, even where a city allows both an accessory dwelling unit and a junior unit on the same lot. The practical step Debbie Marcoux recommends is a pre-approval that prices out what rent could be used, before writing an offer on a property whose numbers depend on it.
As of the live show on September 16, 2026. The cap is a Fannie Mae guideline as described on the air date; other programs calculate accessory unit income differently.
Source: Debbie Marcoux, NMLS #237926, JMJ Financial Group, NMLS #167867, on Mortgage Mom Radio (September 16, 2026).
Does an unpermitted casita or garage conversion still count?
It depends on the appraisal. Fannie Mae's guideline lets an appraiser give value to a converted space when the work was done in a workmanlike manner, and appraisers are not required to pull county permit records. If the appraisal notes that the unit was never permitted, the rental income cannot be used.
The appraiser walks the property and values it on square footage, room count, bedroom count and bathroom count, so a garage conversion that looks properly built can be included without anyone checking the county file. What usually exposes an unpermitted addition is the measurement: when the square footage does not match what is on title, that is a signal for the appraiser to look further, and a note in the report ends the discussion about using the rent. Debbie Marcoux describes the outcome on an unpermitted accessory dwelling unit as a coin flip, and says the only way to know is to order the appraisal and have it reviewed. For a buyer choosing between properties, the recommendation is to buy one where the work was permitted, and to talk it through with a lender first.
As of the live show on September 16, 2026. Appraisal outcomes vary by property and appraiser; nothing here guarantees a specific result.
Source: Debbie Marcoux, NMLS #237926, JMJ Financial Group, NMLS #167867, on Mortgage Mom Radio (September 16, 2026).
Does this accessory dwelling unit income rule apply to FHA or VA loans?
No. The rule described on this page is Fannie Mae's. FHA and VA set their own guidelines for accessory dwelling unit income, and they are not the same, so the answer for any particular borrower depends on the loan program being used rather than on the property alone.
Debbie Marcoux was explicit about the boundary while answering a live question: the guideline covered in the episode is a Fannie Mae conventional guideline, and FHA and VA handle accessory unit income under separate rules, with a separate show planned to cover them. The practical effect is that a buyer comparing a conventional loan against an FHA or VA loan on the same property with a casita can get different qualifying results, because the income calculation is not portable between programs. Anyone counting on rent from an accessory dwelling unit to reach a purchase price should have the conversation with a lender before writing an offer, naming the program. Debbie Marcoux also noted that permitting expectations differ between programs, which is another reason to confirm the specific rule that will govern the file before an offer is written and an appraisal is ordered.
As of the live show on September 16, 2026. Program guidelines change and vary by lender overlay; confirm the current FHA or VA treatment before relying on it.
Source: Debbie Marcoux, NMLS #237926, JMJ Financial Group, NMLS #167867, on Mortgage Mom Radio (September 16, 2026).
Key takeaways
- Fannie Mae now counts accessory dwelling unit rent toward qualifying income on a one-unit home you will live in, when you are buying it or doing a limited cash-out refinance. Fannie Mae announced it in October 2025 and put it into Desktop Underwriter on March 21, 2026 — so it is established policy, not a change that happened this month.
- Only one accessory unit's income counts, even where the city allows a property to have an ADU and a junior ADU.
- That income can be at most 30% of your total qualifying income. It is not the departing-residence or investment-property calculation, where a share of the lease or market rent offsets the payment on that property.
- The property has to be a single-family home on title. A two-, three- or four-unit property falls under the ordinary rental income guidelines instead.
- Permitting matters, and the appraiser decides in practice. Appraisers are not required to pull county permit records, so a garage conversion done in a workmanlike manner can be counted — but if the measurements do not match title and the appraisal notes the unit was never permitted, the income cannot be used.
- An unpermitted conversion can often be permitted after the fact, and California law allows that for some older units. Debbie's advice is to talk to a real estate attorney first, because the county will reassess the property and may add fines.
- This is a Fannie Mae rule. FHA and VA handle ADU income under their own, different guidelines, so ask about the specific program before you count on the income.
- The Fed raised its target rate a quarter point that afternoon, unanimously. Fixed mortgages did not change; variable home equity lines and credit cards are where an increase shows up.
Chapters
- 01:30Welcome, and why this news is not quite what people think
- 03:30Fed day: a quarter-point hike
- 04:00What a hike changes, and what it does not
- 05:30July's split vote versus today's unanimous one
- 06:30Buy the payment you can afford, not the one you hope to refinance
- 08:30What Fannie Mae's ADU rule actually allows
- 09:30Which properties qualify: one unit, on title, owner-occupied
- 10:30How much of the rent counts — the 30% cap
- 13:00Why this matters in California and Arizona
- 14:00Permitting matters
- 14:30Q&A: does a second ADU count too?
- 17:00The appraiser, square footage and “workmanlike manner”
- 20:00Retroactive permits, back taxes, and when to call an attorney
- 23:30Renting a room is not an ADU
- 24:30FHA and VA have their own guidelines
- 27:30Wrap-up: newsletter, new videos and what is coming
Questions answered on this show
“Some cities allow two accessory units on one lot. Does the rent from both count?”
No. Fannie Mae allows the property itself to have more than one accessory unit, but only one unit's rental income can be used to qualify. Armando asked this live, and Debbie went to the guidelines on air to confirm it: even where a city permits an ADU and a junior ADU on the same single-family lot, the qualifying income comes from one of them.
“Does this work if I rent out a room in my house?”
No. This rule is about a separate accessory dwelling unit — a casita, a guest house or a permitted garage conversion with its own living space. Renting a bedroom inside the house is a different question with different rules.
“My casita is not permitted. Does it still count?”
It depends on the appraisal. Fannie Mae's guideline lets an appraiser include a converted space when the work was done in a workmanlike manner, and appraisers are not required to go to the county and pull permit records. But if something looks off — most often when the measured square footage does not match what is on title — and the appraisal notes the unit was never permitted, the rental income is out. Debbie's recommendation is to buy something permitted where you can, and to talk it through with a lender before you count on the income.
“Does this work on FHA or VA?”
This particular change is Fannie Mae's. FHA and VA have their own guidelines for accessory unit income, and they are not the same, so the answer depends on the program you are actually using. Debbie said on air that she plans a separate show on how FHA and VA treat ADUs.
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Full transcript
Show the full transcript (lightly edited for clarity)
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Welcome
Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, I am the Mortgage Mom, and today we are talking about rental income from a casita, a guest house or a converted garage. Armando, thank you so much for jumping on — and yes, this is very good news, but it is not exactly what you think it is. It is going to help people. I do want to get into all of the things around it, because there are stipulations that are not what you would expect.
Armando is watching on YouTube and Karen is on Facebook, so both platforms are going at the same time. If you have a question, please do not hesitate to put it into the chat. I will read it out loud, I will answer it, and I will make sure you get the information you need.
Fed day: a quarter-point hike
Before we jump into rental income on casitas and ADUs, I want to talk about the Fed really quickly. We have all learned already that the Fed does not move mortgage interest rates — the 10-year Treasury and mortgage-backed securities do; the market moves those rates. But today was a big deal, because today was Fed day, and they did decide to hike the Federal Reserve rate.
I was telling you last week and the week before that the odds were there, that it was looking like a hike was coming, and they did it. The hike was a quarter point, which brought us from a target of three and a half to three and three-quarters up to three and three-quarters to four percent.
A couple of things to know. If you have a variable interest rate on a home equity line of credit, that rate will move, and variable credit cards will move, so you will see higher interest and higher monthly payments in the months to come. If you have a fixed rate on your mortgage, nothing happened today. If you have a fixed rate on a home equity loan, or one of the hybrid home equity lines that carry a fixed rate, nothing happened either.
As for mortgage rates today: absolutely nothing, which is exactly what I told you. Right after the announcement we actually saw a little rally, which would have helped us, and then that rally slipped away and went the other direction. The market is still trying to figure out what it wants to do with the news.
The last thing I will say about the Fed. At the last meeting in July, only three officials of the twelve voted for a hike. Today's hike was unanimous — all twelve — and they gave very specific language that the hikes are most likely not done. Most Fed officials are saying we will most likely see another hike at the next meeting, at least one more this year, and more than one in a row is not out of the question.
So buckle up. If you have been thinking about getting financing done, make sure you are getting into a mortgage, a payment and a rate that you can afford. Do not get into something hoping and waiting for rates to come down so you can refinance to afford it, thinking you can keep up short term. Get into something you can afford, and for a good long time.
What Fannie Mae's ADU rule actually allows
So let's jump into this casita and guest house information, because I think it is great information. Again, this is something that was rolled out back in October of last year, and it got into Desktop Underwriter, our computer decision engine, this March — March the 21st. There is now a place to put that rental income in to get the automated decision.
The short of it is that Fannie Mae now lets rental income from an accessory dwelling unit count toward qualifying income when you buy the property or when you do a limited cash-out refinance. A limited cash-out is basically Fannie Mae's rate-and-term refinance: you cannot walk away with cash in pocket beyond a very small set amount.
Which properties qualify
Number one, we can use that rental income if it is a one-unit property that you live in. If you are in a single-family home and you have converted the garage to an ADU with a permit, or you have built an ADU in the backyard, or there is a casita — whatever you want to call it, and it can be attached — it has to be on title as a single-family home. If it is on title as a two-unit, three-unit or four-unit property, those are the normal standard guidelines we use for income from additional units. What we are talking about today is literally single-family homes.
How much of the rent counts
So how does the income work? We can use up to thirty percent of your total qualifying income. This is very different from how we use rental income elsewhere. If you own an investment property, or you are leaving a house to rent it out and buy something else, that is a totally different calculation: there we typically take the lease or the market rent and give you a share of it toward offsetting the monthly debt on that house.
This is completely different. The accessory unit's rent is capped against your own income, so a property that would rent for more than that cap does not give you the full rent toward qualifying. If you have been thinking about buying a home and you are looking for something with an ADU, give me a call and let's talk about what you are looking at buying and what the average rents are for that kind of unit. Let's get you pre-approved, look at your gross monthly income, and I can tell you what rental income we would be able to use to help you qualify in the price range you are trying to reach.
It is still more than we used to be able to do. It used to be that we could not use rental income at all, even if it was an accessory dwelling unit. So this was a step in the right direction by Fannie Mae, and it matters, because a big share of my clients are in California and Arizona, where ADUs are really popular right now.
Now, FHA and VA do not have this rule. Those are different loans, different programs, different guidelines. Today we are talking about Fannie Mae. If you are looking at buying something with FHA, that needs to be a different conversation — call me, or go to the website and book an appointment on my calendar so we can get more in depth on what you are trying to do.
Q&A: does a second ADU count too?
Armando asks: “In some cities, single-family properties are allowed up to two accessory units — an ADU and a junior ADU. Do they count each unit?”
That is a fabulous question, and I anticipated it and wrote the answer down — and now I cannot find my note, so let me look it up for you right now. No: you cannot use rental income from two ADUs to qualify, even though Fannie Mae allows the property itself to have more than one. We would only be able to use one.
And Armando says “boo.” I agree with you. If it is there, and the county is letting you have it on the property, you would think they would allow it. But baby steps, right? Fannie Mae has at least moved in the direction of letting that rental income help offset the monthly payment on the home. Maybe down the road we will see a little more guidance.
Permitting, the appraiser and “workmanlike manner”
Permitting matters. An unpermitted conversion can cause problems with the appraisal and with the loan, and the appraiser has to recognize the unit. This is important to hear, because it is not a clear-cut, black-and-white answer.
Say you convert a garage into an ADU but you do not permit it. Technically, Fannie Mae's underwriting guideline gives the appraiser the ability to use that room in the appraisal report and to give it value if the work was done in a workmanlike manner. Appraisers are not required to go to the county and pull records to see whether permits were taken out for an addition or a conversion. That is not their job. Their job is to walk into the property, see it for what it is, and appraise it for the bank based on square footage, room count, bedroom count, bathroom count and all the rest.
So if they walk into the property, you have converted a garage, and it was done in a workmanlike manner — nothing sticking out that seems off — the appraiser can use that square footage and that room and bathroom count in the value of the property. Could something unpermitted end up included in the appraisal and be allowed to be used with the rental income? Yes, it could. But if it is not permitted and something does not seem right to the appraiser, and it gets noted in the appraisal that it was not permitted, then it is not going to be allowed.
What sets an appraiser off to dig a little more? When they do their measurements and the square footage does not match what is on title, that can indicate to an appraiser that the additional room was not done with a permit. So it is not black and white. If you have an ADU, a casita or a garage conversion that was done without a permit, I am not telling you we would not be able to use the income. I am telling you it is a coin flip, and the only way to know for sure is to get the appraiser out, get the appraisal back, get it reviewed, and then determine whether it is something we can use. If you are going out to buy a home with an ADU, a conversion or a casita, I would recommend buying something that was done with permits.
Retroactive permits, back taxes, and when to call an attorney
Armando put in the chat that California's ADU law allows an unpermitted ADU built before a cutoff date to get retroactive permits, unless it poses a clear threat to health and safety. Armando, you are absolutely correct that if an ADU was built without permits, you can go to the county and get it permitted even though the work is already done.
Take that with a grain of salt. I am not an attorney, and I would highly advise that anybody who owns a home with an unpermitted ADU — whether they bought it that way or did it themselves — seek out a real estate attorney first. As soon as you apply for permits on work that was already done, the county knows the improvements exist, and you will most likely get bills: higher property taxes because the home is now worth more, and possibly fines and other charges you do not want.
So can you go back and permit something that was already done? You absolutely can. Am I recommending that you do? I am not. Am I recommending that you do not? I am not. I am not a real estate attorney and I do not want to put you in any jeopardy based on advice I gave you. I am doing this show for educational purposes only.
What I am telling you is this. If you already own a property with an unpermitted conversion or casita, could we possibly use additional income to help you qualify for a limited cash-out refinance? Yes. If you are looking to buy a property with an unpermitted ADU, casita or garage conversion, could we use rental income to qualify? Possibly — it comes down to that appraiser. And do I recommend that an ADU you build in your backyard or your garage be permitted? Yes. Start off the right way, so the records, title and the county all match. Expect a higher tax bill if you improve the property and it goes up in value and square footage, but you are improving your property, so it goes hand in hand.
Renting a room is not an ADU
Does this work if I rent out a room in my house? The answer is no. That is totally different. We are talking specifically about accessory dwelling units, not a single bedroom in your property.
My casita is not permitted — does it still count? Again, that is where it comes down to what comes back from the appraiser. It is a coin flip, but absolutely worth a shot. If you have seen a property you are thinking about buying, or you are thinking about refinancing a home where you have built a casita and it is not permitted, go to mortgagemomradio.com and get on my calendar so we can discuss what you have got. How big is it? What did you put in it? Is there a bedroom, a bathroom, a kitchen, running water, gas lines? Those are important pieces we need to talk about.
FHA and VA have their own guidelines
Does this work on FHA or VA? I want to remind you that today's show is about Fannie Mae. FHA and VA have completely different guidelines for qualifying with an accessory unit, and the cap I described — the share of your gross monthly income that the rent can make up — is a Fannie Mae guideline. That will be a whole separate show, and I will do it.
Wrap-up
So today I touched on the Fed and gave you the update on ADU income being allowed for Fannie Mae financing. I do not see any other questions in the chat, so we will wrap up.
Make sure you are subscribed to my YouTube channel. If you only get the text messages I send weekly, you are not getting the notifications when I upload videos, and I have been uploading. Coming up you will see a reverse mortgage video, a home equity line versus home equity loan video, and a condo video covering the changes we talked about on a previous live show, including a new pre-approval process for a seller or an agent listing a condo, so they can get ahead of the approval process and know what financing will be available for that unit.
I also have my newsletter that goes out weekly. It keeps you up to date on the hot topics and, in particular, helps you monitor where interest rates are, week by week, so when you see a rate you love you know it is time to reach out about a refinance. Go to mortgagemomradio.com, go to the tools, and you will see the newsletter. Put in your email address; it will look like it is spinning for a while, because it is waiting for you to confirm from your email inbox.
There is a lot more coming on the website: a home equity line pre-qualification that runs a soft credit check and shows you the options available, a reverse mortgage page where you can give me the basics and I can build an estimate and get on a call with you, and a page to keep the past newsletters online so you can look back at where rates were three months, six months or a year ago.
So bookmark the site, get yourself on the newsletter, text LIVE to 844-935-3634 to get a message when I go live, and subscribe to the channel so you do not miss the videos. I hope you have a fabulous rest of your week. I will be back here live next Wednesday at 3 p.m. Pacific. Talk to you all real soon.
Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), CO (100546228), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates, figures and program guidelines discussed were current as of the air date of September 16, 2026, and are not an offer of credit or a rate quote. Loan program guidelines change; confirm current eligibility before relying on it. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.
Next live show Wednesdays, 3:00 PM Pacific on YouTube, with live Q&A