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#1 HUD/FHA Single Family Handbook 4000.1 Page 613

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B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 586 Last Revised: 11/26/2025 (b) Standard The Mortgagee must obtain a completed…

HUD/FHA Single Family Handbook 4000.1 · HUD_FHA_4000.1.pdf · Page 613 · View at official source (HUD.gov — SFH Handbook 4000.1) →

B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 586 Last Revised: 11/26/2025 (b) Standard The Mortgagee must obtain a completed form HUD-92561. (3) Three- to Four-Unit A three- to four-unit Property is either: • a Single Family residential Property with three to four individual Dwelling Units; or • a Single Family residential Property with two individual Dwelling Units and one ADU or three individual Dwelling Units and one ADU. The Mortgagee must obtain a completed form HUD-92561. (4) Accessory Dwelling Unit (a) Definition An Accessory Dwelling Unit (ADU) refers to a single habitable living unit with means of separate ingress and egress that meets the minimum requirements for a living unit. An ADU is a private space that is subordinate in size and within, or detached from a primary one-unit Single Family dwelling, which together constitute a single interest in real estate. (b) Standard A Single Family residential one-unit Property with a single ADU remains a one-unit Property. For any Single Family residential Property with two or more units, a separate additional Dwelling Unit must be considered as an additional unit. (5) Condominium Unit (a) Definitions A Condominium Unit refers to real estate consisting of a one-family Dwelling Unit in a Condominium Project. Condominium Project refers to a project in which one-family Dwelling Units are attached, semi-detached, detached, or Manufactured Home units, and in which owners hold an undivided interest in Common Elements. (b) Standard A Condominium Unit must be either located within an FHA-approved Condominium Project, meet FHA’s definition of a Site Condominium, or have

#2 HUD/FHA Single Family Handbook 4000.1 Page 852

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D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 3. Acceptable Reporting Forms and Protocols (04/10/2025) Handbook 4000.1 825 Last Revised:…

HUD/FHA Single Family Handbook 4000.1 · HUD_FHA_4000.1.pdf · Page 852 · View at official source (HUD.gov — SFH Handbook 4000.1) →

D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 3. Acceptable Reporting Forms and Protocols (04/10/2025) Handbook 4000.1 825 Last Revised: 11/26/2025 The Appraiser must report when the Property has security bars on bedroom windows or doors. (C) Nonstandard House Styles (1) Definition Nonstandard House Style refers to unique Properties in the market area, including log houses, earth sheltered housing, dome houses, houses with lower than normal ceiling heights, and other houses that in the Appraiser’s professional opinion, are unique. (2) Required Analysis and Reporting The Appraiser must provide a comment that the nonstandard house style appears structurally sound and readily marketable and must apply appropriate techniques for analysis and evaluation. In order for such a Property to be fully marketable, the Appraiser must demonstrate that it is located in an area of other similar types of construction and blend in with the landscape. The Appraiser may require additional education, experience, or assistance for these types of Properties. (D) Modular Housing (1) Definition Modular Housing refers to Structures constructed according to state and local codes off-site in a factory, transported to a building lot, and assembled by a contractor into a finished house. Although quality can vary, all of the materials – from framing, roofing and plumbing to cabinetry, interior finish and electrical – are identical to what is found in comparable quality conventional “stick-built” housing. (2) Required Analysis and Reporting The Appraiser must treat Modular Housing the same as stick-built housing, including reporting the appraisal on the same form. The Appraiser must select and analyze appropriate comparable sales, which may include conventionally built housing, Modular Housing or Manufactured Housing. (E) Accessory Dwelling Unit (1) Identification of an Accessory Dwelling Unit An Accessory Dwelling Unit (ADU) is subordinate in size, location, and appearance to the primary Dwelling Unit and may or may not have separately

#3 VA Lenders Handbook (Pamphlet 26-7) Page 388

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Appraisal Report 11-10 6. Accessory Dwelling Unit Change Date February 22, 2019 • This Chapter has been revised in its entirety. a. Single Real Estate Entity An Accessory Dwelling…

VA Lenders Handbook (Pamphlet 26-7) · VA-Lender-Handbook.pdf · Page 388 · View at official source (VA.gov — Appraisers/Staff Appraisal Reviewer) →

Appraisal Report 11-10 6. Accessory Dwelling Unit Change Date February 22, 2019 • This Chapter has been revised in its entirety. a. Single Real Estate Entity An Accessory Dwelling Unit (ADU) is a living unit including kitchen, sleeping, and bathroom facilities added to or created within a single-family dwelling, or detached on the same site. A manufactured home on the site could be an ADU. The dwelling and the ADU together constitute a single real estate entity. b. Highest and Best Use As part of the highest and best use analysis, the appraiser must determine if the property is a single-family dwelling with an ADU, or a two-family dwelling. The highest and best use must be a legal use (see Topic 10). A two-family dwelling must be appraised on the Fannie Mae Form 1025, Small Residential Income Property Appraisal Report. c. ADU Valued Separately An ADU is usually subordinate in size, location, and appearance to the primary dwelling unit and may or may not have separately metered utilities and separate means of ingress and egress. The appraiser must not include the living area of the ADU in the calculation of the GLA of the primary dwelling. The ADU must be valued separately as a line item on the market data grid. d. Notify the Lender if More than One Unit The appraiser must notify the lender if a property has more than one ADU. e. Detached Buildings A manufactured home, shed, or other detached building on the property which does not have kitchen, sleeping, and bathroom facilities or cannot be legally used as a dwelling, may be valued as storage space if it does not present any health or safety issues.

#4 UAD 3.6 / URAR (FNMA) Page 346

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Appendix 1: Glossary Appendix F-1: URAR Reference Guide Page 346 of 375 Version 1.3 Appendix 1: Glossary Term Definition Accessory Dwelling Unit (ADU) An additional living area…

UAD 3.6 / URAR (FNMA) · Appendix F-1 URAR Reference Guide v1.3.pdf · Page 346 · View at official source (fanniemae.com/uad) →

Appendix 1: Glossary Appendix F-1: URAR Reference Guide Page 346 of 375 Version 1.3 Appendix 1: Glossary Term Definition Accessory Dwelling Unit (ADU) An additional living area that is independent of the primary dwelling unit that includes a kitchen, full bathroom, and sleeping area. It has a separate ingress and egress from the primary dwelling unit. It is generally subordinate in size and location to the primary dwelling, and may be attached to a house or garage, or built as a stand-alone unit. Generally, it will use the utility connections of the primary house. Apparent Environmental Condition A contamination (hazard or nuisance) that may affect the value and marketability of the site. Assessor Record Recorded information that identifies and describes real estate property (e.g., a record of transactions, value for taxation purposes), sometimes referred to as a property record, tax card, or public record. Below Grade A level that is either entirely or partially below the ground level. If any portion of an area is below ground level, then the entire level is considered below grade. Community Land Trust (CLT) A non-profit entity, or federal, state, or local government that owns land and leases it under a long-term ground lease to a homebuyer who purchases the improvements on the land. The ground lease contains certain land use restrictions that preserve use of the property for affordable housing. Deferred Maintenance Lack of normal maintenance and upkeep that may result in repairs or replacement of items. Dwelling Any building containing living unit(s) designed to be used as residence(s). A portion of the dwelling may also contain ADU(s). Extraordinary Assumption An assumption as of the effective date of the appraisal results, which, if found to be false, could alter the appraiser’s opinions or conclusions. In essence, an extraordinary assumption is what the appraiser assumes to exist (e.g., evidence of termite infestation). Finished Area Whether above or below grade, an area is considered finished when it is enclosed, suitable for year-round living, and meets locally accepted standards. Reference published guidelines by the GSEs, government agencies, or other identified secondary market participants for specific guidance. Floor Plan A visual representation or diagram that shows the interior and exterior walls, doors, and stairs of a dwelling. Hypothetical Condition A condition that is contrary to what is known by the appraiser to exist on the effective date of the assignment. The hypothetical condition is used to value

#5 UAD 3.6 / URAR (FNMA) Page 6

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6 Example 2 - One level with ADU with interior/exterior access and ceilings equal to or greater than 7 feet • 1,291 square feet one level home with 728 square feet attached ADU…

UAD 3.6 / URAR (FNMA) · uad-ansi-reporting-requirements-job-aid.pdf · Page 6 · View at official source (fanniemae.com/uad) →

6 Example 2 - One level with ADU with interior/exterior access and ceilings equal to or greater than 7 feet • 1,291 square feet one level home with 728 square feet attached ADU that is accessible from the primary dwelling unit • Finished Above Grade Area (Dwelling) = 1,291 square feet • Finished Above Grade Area (Attached ADU) = 728 square feet Input into your software Dwelling and ADU count with Levels Units Excluding ADUs 1 Levels in Unit 1 Accessory Dwelling Units 1 Levels in Unit 1 Area Breakdown Dwelling Finished Above Grade 1,291 Sq. Ft. Finished Above Grade (Nonstandard) 0 Sq. Ft. Unfinished Above Grade 0 Sq. Ft. Finished Below Grade 0 Sq. Ft. Finished Below Grade (Nonstandard) 0 Sq. Ft. Unfinished Below Grade 0 Sq. Ft.

#6 Freddie Mac Seller/Servicer Guide Page 47

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the mandatory effective November 2, 2026 version of this section. This section contains requirements related to: Eligible properties with ADUs Ineligible properties with ADUs…

Freddie Mac Seller/Servicer Guide · Freddie_Mac_Guide_2026-06-25.txt · Page 47 · View at official source (guide.freddiemac.com) →

the mandatory effective November 2, 2026 version of this section. This section contains requirements related to: Eligible properties with ADUs Ineligible properties with ADUs Appraisal requirements Manufactured Home ADUs (a) Eligible properties with ADUs Freddie Mac will purchase an eligible Mortgage secured by a 1-, 2- or 3-unit property that has one ADU. For Mortgages secured by Manufactured Homes, including CHOICEHomes®, with an ADU, the primary dwelling unit must be a multiwide Manufactured Home. An ADU is classified as an additional finished area that: Includes a kitchen, bathroom and separate entrance. Note: The absence of cooking appliance(s) in a kitchen does not change the classification as an ADU. Is independent of the primary dwelling unit Is smaller in size than the primary dwelling unit (i.e., the ADU's finished area is less than the primary dwelling unit's finished area) and Contributes less to the value of the property than the primary dwelling unit Examples of eligible ADU configurations include: A 1-, 2-, or 3-unit dwelling with an ADU above a garage or outbuilding, A dwelling with an attached or detached ADU, or A dwelling with an ADU in the basement (b) Ineligible properties with ADUs Mortgages secured by the following ADU configurations are not eligible for purchase by Freddie Mac: A 2- or 3-unit property with an ADU that does not comply with zoning and land use requirements (illegal zoning) A 1-, 2- or 3-unit property with two or more ADUs A 4-unit property with an ADU (c) Appraisal requirements The appraiser must determine whether the subject property has an ADU and report the appraisal on the appropriate form. When determining whether the subject property has an ADU, the appraiser must consider zoning and land use requirements and all property characteristics, specifically the unit's utility and the property’s highest and best use. If the appraiser determines the subject property has an ADU, the appraisal report must include: A detailed description of the ADU Any effect the ADU has on the market value or marketability of the subject property Specific information about the ADU, including but not limited to its general condition, its room count (including the number of bedrooms and baths) and the finished square footage area (i) For properties with legal or legal non-conforming zoning compliance or locations without zoning If the subject property ADU complies with the zoning and land use requirements (legal or legal non-conforming or locations without

#7 Fannie Mae Selling Guide Page 548

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Form Purpose Uniform Residential Appraisal Report (Form 1004) For traditional appraisals of one-unit properties and units in PUDs (including those that have an illegal second unit…

Fannie Mae Selling Guide · Selling Guide - 06-03-2026.pdf · Page 548 · View at official source (selling-guide.fanniemae.com) →

Form Purpose Uniform Residential Appraisal Report (Form 1004) For traditional appraisals of one-unit properties and units in PUDs (including those that have an illegal second unit or accessory dwelling unit) based on an interior and exterior on-site physical inspection of the property by the appraiser. Form 1004 also may be used for two-unit properties, if each of the units is occupied by one of the co-borrowers as their principal residence or if the value of the legal second unit is relatively insignificant in relation to the total value of the property (as might be the case for a below-grade unit or a unit over a garage). In addition, appraisals for units in condo projects that consist solely of detached dwellings may be documented on Form 1004, if the appraiser includes an adequate description of the project and information about the homeowners’ association fees and the quality of the project maintenance. Appraisals reported on Form 1004 must be completed in accordance with the UAD Specification. Uniform Residential Appraisal Report (Desktop) (Form 1004 Desktop) For appraisals of one-unit properties and units in PUDs (including those that have an illegal second unit or accessory dwelling unit) that are not based on an interior and exterior on-site physical inspection of the property by the appraiser. The property data may be collected through secondary data sources or by someone other than the appraiser. This form is not designed to report an appraisal for a manufactured home, or for a unit in a condo or co-op project. Appraisals reported on Form 1004 Desktop must be completed in accordance with the UAD Specification. Uniform Residential Appraisal Report (Hybrid) (Form 1004 Hybrid) For appraisals of one-unit properties and units in PUDs (including those that have an illegal second unit or accessory dwelling unit) that are based on interior and exterior property data collection. This form is not designed to report an appraisal for a manufactured home, or for a unit in a condo or co-op project. Appraisals reported on Form 1004 Hybrid must be completed in accordance with the UAD Specification. Manufactured Home Appraisal Report ( Form 1004C) For traditional appraisals of one-unit manufactured homes (including manufactured homes in a PUD, condo, or co-op project, and MH Advantage properties) based on interior and exterior property inspections. Individual Condominium Unit Appraisal Report ( Form 1073) For traditional appraisals of one-unit properties in condo projects based on interior and exterior

#8 Fannie Mae Selling Guide Page 407

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B2-2-03, Multiple Financed Properties for the Same Borrower; B3-3.1-01, General Income Information (Continuance of Income); B3-4.1-01, Minimum Reserve Requirements; and B3-6-06,…

Fannie Mae Selling Guide · Selling Guide - 06-03-2026.pdf · Page 407 · View at official source (selling-guide.fanniemae.com) →

B2-2-03, Multiple Financed Properties for the Same Borrower; B3-3.1-01, General Income Information (Continuance of Income); B3-4.1-01, Minimum Reserve Requirements; and B3-6-06, Qualifying Impact of Other Real Estate Owned. See also, DU Job Aids, for additional information on using income from rental property in DU. Eligible Properties Rental income is an acceptable source of stable income if it can be established that the income is likely to continue. If the rental income is derived from the subject property, the property must be one of the following: a one-unit principal residence property with an existing accessory dwelling unit (ADU), with rental income from the ADU only, a two- to four-unit principal residence property in which the borrower occupies one of the units, or a one- to four-unit investment property. If the income is derived from a property that is not the subject property, there are no restrictions on the property type. For example, rental income from a commercial property owned by the borrower is acceptable if the income otherwise meets all other requirements (it can be documented in accordance with the requirements below). Ineligible Properties Generally, rental income from the borrower’s principal residence (a one-unit principal residence or the unit the borrower occupies in a two- to four-unit property) or a second home cannot be used to qualify the borrower. However, Fannie Mae does allow certain exceptions to this policy for boarder income and rental income on principal residence properties with accessory units. See B3-3.4-04, Boarder Income, for boarder income requirements. Rental Income from an ADU on the Subject Property Rental income from an existing ADU can be used in qualifying with the following conditions: one-unit, principal residence only, rental income from only one ADU allowed, purchase or limited cash-out refinance transactions, and qualifying rental income amount from the ADU is limited to 30% of the total qualifying income. All other documentation and requirements contained within this topic apply. General Requirements for Documenting Rental Income (Subject and Non- Subject Property) If a borrower has a history of renting the subject or another property, generally the rental income will be

Chief Appraiser Says Reading the actual guideline text below — never a general AI guess

We want to be clear: the guidelines don't use the term "guest house" at all. What they do address is an **Accessory Dwelling Unit (ADU)**, which is a separate living unit with its own kitchen, bathroom, and sleeping area, plus a separate entrance—and it must be smaller than and subordinate to the main house. HUD, VA, Fannie Mae, and Freddie Mac all treat an ADU as a real dwelling unit that gets valued separately and affects how the property is classified, not as informal guest space. If you're asking about a structure on the property that functions like a "guest house," the appraiser needs to determine whether it legally qualifies as an ADU (has kitchen, bath, and separate entry) or whether it's just a shed or storage building, because that distinction changes everything about the appraisal. Straight from HUD/FHA Single Family Handbook 4000.1, VA Lenders Handbook (Pamphlet 26-7), UAD 3.6 / URAR (FNMA), Freddie Mac Seller/Servicer Guide, and Fannie Mae Selling Guide — nothing added.

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