When your family begins to grow, you will realize that adding space and comfort to your home is no longer a luxury, it’s a necessity. The problem, however, is that adding the space that you need to accommodate your growing family in California is expensive.

Fortunately, there’s a solution to your problem: ADUs (Accessory Dwelling Units).

What is an ADU?

An ADU refers to an Accessory Dwelling Unit that is often considered a secondary home or apartment within your lot. It is an affordable, effective, and innovative option to add that much-needed housing space in California.

When you apply for California ADU grants, you can get up to $40,000 for the reimbursement of the pre-development costs as well as the non-recurring closing costs that often come when building ADUs.

Pre-development costs cover site prep, permits, architectural design, soil tests, property surveys, impact fees, and finally, energy reports. Non-recurring closing costs, on the other hand, refer to the one-time fees you need to pay at the time of your purchase. They include the title insurance, escrow fee, appraisal fee, underwriting fee, notary fee, recording fee, and transfer taxes.

What Are the Benefits of the ADU Grant Program?

The California ADU grants were created to support the development of ADUs in the state. This in turn helps homeowners convert unutilized spaces in their property into full-functioning structures to house family members or tenants. Besides this, grants were put into place to maximize California’s urban spaces. So, cities like Los Angeles, San Diego, San Francisco, Inglewood, Lakewood, Pasadena, La Mesa, Arcata, and Shasta Lake can offer privileges to individuals who want to create their own ADU. By taking advantage of this opportunity, you can experience various benefits, such as the following:

1. Affordable Housing

The total cost it takes to build your own ADU depends on multiple factors, including size, materials, type, and location. But they’re still comparatively more affordable than investing in a new property altogether.

2. Increased Value of Property

While investing in an ADU is still quite pricey, you can gain the advantage of increasing your overall property value. If you decide to rent or sell your property, potential buyers will realize how much of an asset your ADU is.

3. Land Conservation

Apart from the personal benefits you can gain from obtaining an ADU grant, you can also help the real estate industry. By adding an ADU to your current property, you can place an available housing unit on the market without taking up extra land. Because of this, an ADU is far more sustainable than single-family homes.

Who is Eligible for ADU Grants?

There’s no doubt that applying for an ADU grant is extremely beneficial. However, to control the number of ADUs being built, the government has created criteria for eligibility. Generally, those who qualify for the grant must be within low to moderate income brackets.

As of 2022, those who can apply for California ADU grants must have an annual household income of no more than the limit per county.

For instance, if you live in Alameda County, you qualify for the grant if you earn no more than $282,000. In Los Angeles, the income limit is set at $180,000. The highest income limit among all counties in California is in San Francisco and San Mateo, which is valued at $300,000.

To know if you qualify, be sure to call the ADU grant program lenders in your county. They should be able to assist you in your endeavor.

How To Apply for California ADU Grants

Follow these steps if you are interested in applying for the ADU grant program.

1. Application

You can apply by contacting a private loan officer in your county. Some of the grant lenders include Academy Mortgage Corporation, Envoy Mortgage, CalCon Mortgage, LoanDepot, Land Home Financial Services, and Homebridge Financial Services, Inc.

When you contact them, be sure to bring the necessary documents such as pay stubs, employment history, bank statements, and previous tax returns.

2. Loan Approval and Pre-Development

Once you get approved, you need to provide a submission package that includes the itemized list of pre-development expenses, a closing disclosure, a copy of the construction loan deed of trust, the construction loan approval, and the escrow instructions for the money transfer.

3. Grant Disbursement

Next, the grant authorities will deposit the money into the loan account. The total construction loan will then be reduced.

Conclusion

If you’re thinking of expanding your home, applying for an ADU grant is extremely beneficial. Follow these steps to ensure that you complete the application process as smoothly as possible. For more information about California’s ADU grants, visit the California Housing Finance Agency website.

If you are ready to start your ADU build, contact us today!

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FAQs

To learn more about the California ADU grant program, take a look at our most commonly asked questions below.

An ADU grant program is a scheme that aims to reduce the total cost of building a new housing unit within the homeowner’s property while increasing the number of living spaces in California.
You can either have an approved loan or refinance the primary mortgage of your home. Alternatively, you can take your home’s second mortgage to gain access to your equity. If you find that you have a lot of debt, you can also explore other loans like renovation loans, construction loans, or other kinds of bridge financing.
There’s a lot that goes into building an ADU in California. For example, you need to get a permit before starting construction. This will cost around $750. Then, you need to submit your plan to the municipality for evaluation and approval. This will cost you around $1,700.
Once your plans are approved, the next step is to contact a structural engineer or architect to design your unit, which will run from about $2,500 to $11,000. On top of that, you also need to acquire liability insurance in case of accidents, which totals around $1,000.
After finalizing the concept, it’s time to put the plan into action. For this step, you’ll need a general contractor, plumber, and electrician, which will cost you about $20,000, $12,000, and $9,000 respectively.
For the home decor and materials, you may need to shell out an additional $10,000 to $20,000. So, overall, you can expect to pay more than $100,000 for the ADU.
While the $40,000 California grant does not cover the totality of your expenses, it’s still a lot of help to reduce the costs.
These are general estimates. Prices are subjective to each individual and are dependent on many different factors. For more information on cost, get in touch with us today to discuss your plans.

What You Need to Know About California ADU Grants