Why a lender's projected ADU rent can land far below a buyer's own estimate
Take a purchase of a 1,900 square foot single family home with a detached garage planned for ADU conversion, where the buyer's own underwriting put the converted garage at 1,650 a month based on three neighborhood comps, and the purchase price ceiling was built around counting a chunk of that toward qualifying income. A loan officer confirming early that a program allows projected ADU income toward qualifying on an owner-occupied purchase, subject to a cap, is not the same as confirming the actual number that will survive underwriting. Three things commonly reduce the figure. The appraiser's market rent estimate often comes in lower than a buyer's own comps because it draws from the whole submarket rather than a handpicked set, and because an as-completed estimate on an unconverted garage is inherently more conservative. The program then typically applies a vacancy and maintenance factor to that appraised figure. Finally, a cap on what share of qualifying income the ADU rent can represent often binds before the reduced figure is even fully used. In a case like this, a buyer might model roughly 1,400 dollars of usable monthly income into qualifying and see something closer to 620 survive, dropping the purchase price ceiling by 60,000 or more and putting the contract price out of reach, with earnest money and inspection, appraisal, and survey costs at risk if the seller has a backup buyer. The fix is to order the appraiser's market rent form, or a realistic estimate of it, before setting a price ceiling, and at minimum to model the appraiser's likely number at roughly 75 percent of a comp-derived figure. Asking a loan officer to run the qualifying math in writing with a specific rent figure plugged in, rather than confirming that a program exists in the abstract, closes the gap between program eligibility and the actual number that will apply. Terms and applied factors can also change between an initial conversation and underwriting, so confirming them in writing close to the pricing decision matters.
