CalHFA ADU Grant Program - Get $40k to Build an ADU
Get $40,000 to build an ADU (Accessory Dwelling Unit) in California via CalHFA
The state of California has set aside millions of dollars for a CalHFA ADU grant program and it is making a lot of changes in 2022 that will allow more homeowners to access the grant, and get more money when they do.
“California Comeback Plan funds new $100 million grant program for low- to moderate-income homeowners to build accessory dwelling units”
I highly recommend you look at the CalHFA website - and keep an open mind about this grant. They’ve done a lot to improve it in the past 6 months, and things are moving very quickly. I expect this grant (and the loans that qualify you for the grant) to get better and better as time goes on.
This article will summarize the current grant as of April 2022, rumors about how it will expand later this summer, and I’m adding personal opinion based on information my clients and readers have shared with me.
ADU Grant Program Summary
Up to $40,000 (increased from the original $25,000 ADU Grant)
You have to use the grant for pre-construction costs
Soft costs like plans and permits
Non-recurring closing costs like buying down interest rates
There are income eligibility requirements
Low to moderate income, up to $200k in some parts of CA
Borrower income requirement, NOT household requirement
It’s a grant, so you don’t need to pay it back
To get the grant, you need to use an approved loan from an approved lender
Current list of lenders here: https://www.calhfa.ca.gov/adu/
But there are rumors they will be expanding this drastically in Summer 2022
The loans available are getting better and better
In brief, a homeowner can get up to $40,000 that they do not need to pay back, if they meet eligibility requirements. And the eligibility requirements have loosened up a lot since Newsom signed the bill in September 2021.
What is the ADU grant program?
Part of the California Comeback Plan legislative package funded a big ADU grant program. Eligible homeowners can get up to $40,000 to apply to pre-construction costs for an Accessory Dwelling Unit (ADU).
ADUs are expensive and there are a lot of pretty high costs in pre-construction so this grant is going to help a lot of people out.
Is it a grant or a loan?
This part confuses a lot of people. CalHFA has a $40,000 ADU grant that you don’t need to pay back.
But to get the grant, you need to also get a loan from one of their pre-approved lenders.
This is even more confusing because CalHFA is more well-known for its loans like the CalFHA loan for first time homebuyers — and these loans are not necessarily the ones that will get you the grant.
For example that first time homebuyer loan is to buy a house. To get the ADU grant, you generally need to get a construction loan or similar loan which is designed for when you already own the property and want to spend money building or remodeling. [Revision: it appears you can include the construction costs of the ADU in a home purchasing loan - I’m getting more details about this from the lender]
Are the loans any good?
When the ADU grant program first launched, there was only one pre-approved lender and they were swamped. Then they expanded to three lenders and now there are several lenders. And each lender has a wide variety of loans. So the options are getting better with every passing month.
That said, almost all the lenders my clients have spoken to are offering similar types of loans and they tend to have the same strengths and weaknesses.
The biggest weakness that keeps coming up is that the lender often requires you to refinance. This often turns off homeowners who just locked in a great rate on their primary mortgage and would lose a lot of money over the long haul if they refinanced to get $40,000 today.
These loans also typically require you to have a permit in hand and be working with a licensed General Contractor (as opposed to being an owner builder).
That said, the program has expanded and improved multiple times since the California Comeback Plan was signed into law in September 2021, and there are several changes planned for May and June 2022…
What’s going to change in Summer 2022
A representative of CalHFA has said that they will be opening up the application process to allow a wider variety of loans to enter the program.
I’ve been to public meetings in Napa County where it was specifically mentioned that the Redwood Credit Union ADU Construction Loan would be part of this expanded list of loans.
This RCU loan doesn't currently work with the CalHFA ADU Grant, but the rumor is it will join the list of approved loans later in 2022
That RCU ADU Loan is exceptional in that it counts the future rental income and value of the ADU when calculating the homeowner’s Loan To Value ratio (LTV), it takes a second position without requiring a refinance, there are no early payment penalties, and it’s a 20 year fixed at 4.375%.
Personally, I will be looking at using the RCU ADU loan in conjunction with this grant as soon as it becomes available for my own backyard. This seems like the most appealing financing package I’ve seen in the country.
How do I finance an ADU in California?
I’m not a financial advisor or lender - so this is general information. For information about your specific situation, speak to a licensed lender.
Most of my clients do a cash out refinance of their primary mortgage or they take a HELOC or second mortgage out on their house to access the equity in their home. If a client already has a lot of debt, then they often seek out a construction loan, renovation loan, or some other type of bridge financing.
Construction loans often require my clients to have spent money on plans and permits before they can get the loan, so this grant is pretty perfect for that situation where it can cover the pre-construction costs incurred that the construction loan often doesn’t touch.
This $40,000 ADU grant program is not enough money to cover the cost of the ADU, and you can only apply the grant to pre-construction costs like permits, plans and non-recurring closing costs — but it is still a large amount of money that will help make a budget more achievable, if the loan conditions are right for your situation.
How is ADU value calculated?
Speak to lenders about how they consider the value of your ADU when calculating how much money you can qualify for.
Small differences in how the ADU value is calculated can have a massive impact on how much money you can access for the ADU construction, in addition to the ADU grant.
Many of the current lenders on CalHFA’s reapproved lender list will attribute no value to the unbuilt ADU when calculating your loan to value ratio. Some may attribute “as complete” value but they won’t necessarily count the future rental income of an ADU toward its value. There are rumors that the loans and lenders on CalHFA’s approved list will really expand by June 2022 and this will hopefully include some lenders that count the future rental value of the ADU when calculating your loan to value ratio.
What is the CalHFA ADU grant program?
What is the benefit of CalHFA loan?
To be clear, this article is about an ADU grant from CalHFA - it is NOT about a loan from CalHFA.
To qualify for the CalHFA grant, you need to work with one of the lenders they have approved for the ADU grant program. But this is not the same as a CalHFA loan.
There is frequent confusion because CalHFA offers loans (eg CalFHA first time homebuyer loan). For more information about their loans, you can visit this page: https://www.calhfa.ca.gov/homebuyer/programs/index.htm. But it’s not necessarily related to the ADU grant!
Is CalHFA a government agency?
Yes, CalHFA is the California Housing Finance Agency.
They’re probably best-known for their first time homebuyer loan (which is NOT related to the ADU grant program).
Do you have to pay back CalHFA grants?
The CalHFA ADU grant does not have to be paid back. It is a grant, not a loan.
That said, to get the grant, you need to get one of the loans from CalHFA’s approved lenders. That loan will almost certainly have terms requiring you to pay them back.
What is meant by accessory dwelling unit?
This grant is specifically for the construction of an Accessory Dwelling Unit (ADU) in California, in an owner-occupied property.
If you want to build a house in your backyard or convert part of your existing structures into a new home, you can apply for an ADU permit.
This grant can be applied to the pre-construction costs involved in that ADU development (ie plans, permits, and non-recurring closing costs).
How do I know if I’m eligible?
You can look up your zip code and see the CalHFA income limits here: https://www.calhfa.ca.gov/adu/#eligible
At the time of publishing this post, here are some of the income limits on the CalHFA website [note this is not being maintained after April 2022]
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</table>| COUNTY | INCOME LIMIT |
|---|---|
| ALAMEDA | $248,000 |
| ALPINE | $188,000 |
| AMADOR | $155,000 |
| BUTTE | $139,000 |
| CALAVERAS | $161,000 |
| COLUSA | $139,000 |
| CONTRA COSTA | $248,000 |
| DEL NORTE | $139,000 |
| EL DORADO | $180,000 |
| FRESNO | $139,000 |
| GLENN | $139,000 |
| HUMBOLDT | $142,000 |
| IMPERIAL | $139,000 |
| INYO | $148,000 |
| KERN | $139,000 |
| KINGS | $139,000 |
| LAKE | $139,000 |
| LASSEN | $142,000 |
| LOS ANGELES | $158,000 |
| MADERA | $139,000 |
| MARIN | $248,000 |
| MARIPOSA | $139,000 |
| MENDOCINO | $139,000 |
| MERCED | $139,000 |
| MODOC | $139,000 |
| MONO | $161,000 |
| MONTEREY | $161,000 |
| NAPA | $216,000 |
| NEVADA | $182,000 |
| ORANGE | $211,000 |
| PLACER | $180,000 |
| PLUMAS | $144,000 |
| RIVERSIDE | $153,000 |
| SACRAMENTO | $180,000 |
| SAN BENITO | $179,000 |
| SAN BERNARDINO | $153,000 |
| SAN DIEGO | $188,000 |
| SAN FRANCISCO | $248,000 |
| SAN JOAQUIN | $148,000 |
| SAN LUIS OBISPO | $193,000 |
| SAN MATEO | $248,000 |
| SANTA BARBARA | $178,000 |
| SANTA CLARA | $248,000 |
| SANTA CRUZ | $221,000 |
| SHASTA | $139,000 |
| SIERRA | $167,000 |
| SISKIYOU | $139,000 |
| SOLANO | $196,000 |
| SONOMA | $204,000 |
| STANISLAUS | $139,000 |
| SUTTER | $148,000 |
| TEHAMA | $139,000 |
| TRINITY | $139,000 |
| TULARE | $139,000 |
| TUOLUMNE | $149,000 |
| VENTURA | $195,000 |
| YOLO | $183,000 |
| YUBA | $148,000 |
Important links and references:
CalHFA website: https://www.calhfa.ca.gov/adu/
CalHFA ADU Grant flyer: https://www.calhfa.ca.gov/adu/homeowner/adu-steps.pdf
CalHFA Terms Sheet: https://www.calhfa.ca.gov/homeownership/programs/termsheet-adu.pdf
Three documents from Guild Mortgage, one of the pre-approved lenders:
Renovation loan guide
ADU Grant flyer
This table shows income eligibility as of June 2021 and is not being maintained past April 2022. Please go to the CalHFA website and use their AMI tools to see the eligibility requirements for your specific project.
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Video links:
🏠 Short video about Grant: https://youtube.com/shorts/mYV5s7IztMY
🏠 Long Video about RCU's ADU Construction Loan: https://youtu.be/olLG0ZsjGTQ
🏠 CalHFA Video: https://www.youtube.com/watch?v=wk8TGDbuPJQ
Pre-Approved Lenders list as of April 26, 2022
Academy Mortgage Corporation
Renovation Lending Manager
Gene Krawchuk
phone: 253.533.9051
email: gene.krawchuk@academymortgage.com
CalCon Mortgage, Inc
Northern California Areas
Sean Germon
phone: 858.300.6241
email: sgermon@onetrusthomeloans.com
Southern California Areas
Patrick Germon
phone: 858.203.9467
email: pgermon@onetrusthomeloans.com
Envoy Mortgage, Ltd.
Merced - Branch Manager
Robert Dylina
phone: 209.233.0121
email: rdylina@envoymortgage.com
Walnut Creek – Sales Manager
Kelle Murphy
phone: 925.642.0900
email: kmurphy@envoymortgage.com
Turlock – Loan Originator
Andrew Narsi
phone: 209.645.6098
email: anarsi@envoymortgage.com
Guild Mortgage, LLC Renovation Specialist Financing Team
National Renovation Sales Manager
Danny Fitzpatrick
website: loans4remodeling.com
email: dfitzpatrick@guildmortgage.net
Homebridge Financial Services, Inc
Temecula and Surrounding areas including north San Diego County
Ben Mireles
email: ben.mireles@homebridge.com
phone: 951.294.9134
Greater Inland Empire including the High Desert
Nancy Kenny
email: nancy.kenny@homebridge.com
phone: 909.225.8787
Greater Inland Empire including the High Desert
Joe Galvan
email: joe.galvan@homebridge.com
phone: 909.438.3696
Greater Palmdale and Lancaster areas
Vince Cardona
email: vince.cardona@homebridge.com
phone: 661.802.0389
North San Fernando Valley and Greater Santa Clarita/Acton areas
Josh Jarrard
email: josh.jarrard@homebridge.com
phone: 818.385.2327
Northern Bay area and Inland
Kathy Zickenberg
email: Kathy.zickenberg@homebridge.com
phone: 925.706.6706
Land Home Financial Services
Dennis Brunelle
email: Dennis.Brunelle@lhfs.com
phone: 925.338.8650
LoanDepot
Southern California
John Sway
email: jsway@loandepot.com
phone: 760.707.0238
MLD Mortgage, Inc. dba The Money Store
Myra Alvarez
email: malvarez@themoneystore.com
phone: 559.214.2655
Adriana Garcia
email: agarcia@themoneystore.com
phone: 661.237.0421
Alayne Garcia
email: alayne.garcia@themoneystore.com
phone: 559.214.2654
Luis Garcia
email: lgarcia@themoneystore.com
phone: 520.485.4279
Claudia Sandoval
email: csandoval@themoneystore.com
phone: 805.262.7130
Jonathan Sandoval
email: jsandoval@themoneystore.com
phone: 805.262.9661
Robert Phipps
email: robert.phipps@themoneystore.com
phone: 805.813.5626
Stephanie Whiting
email: swhiting@themoneystore.com
phone: 925.412.3454
Mortgage Management Consultants, Inc.
Executive Vice President
Tom Hamilton
email: Tom@mmclending.com
website: www.mmclending.com
phone: 844.662.5363 ext 209
Platinum Home Mortgage Corporation
Bakersfield Area
Mortgage Consultant
Carmen Alberto
email: carmen.alberto@phmc.com
phone: 661.716.4331
Mortgage Consultant
Cynthia Ornelas
email: cynthia.ornelas@phmc.com
phone: 661.428.8302
Mortgage Consultant
Kimberly Smith
email: kimberly.smith@phmc.com
phone: 661.978.2997
Lancaster Area
Branch Manager
Mark Oaks
email: mark.oaks@phmc.com
phone: 661.579.7474
Porterville Area
Branch Manager
Michael Garay
email: mike.garay@phmc.com
phone: 559.791.0143
Branch Manager
Joe Fernandez
email: joe.fernandez@phmc.com
phone: 559.791.0143
Richmond Area
Assistant Branch Manager
Grace Davis
email: grace.davis@phmc.com
phone: 510.262.6622
Assistant Branch Manager
Sandy Ovalle
email: sandy.ovalle@phmc.com
phone: 800.600.6326
Walnut Creek Area
Branch Manager
Jon Daco
email: jon.daco@phmc.com
phone: 925.357.8287