the ADU Dude

Jan 8, 2022

3 Mistakes to avoid before securing ADU financing for homeowners

Just because one lender denies you doesn’t mean they all will. Lenders are a dime a dozen.

When My wife and I got married and wanted to buy a house but didn’t want that huge monthly mortgage payment.

Before buying my first house I knew I needed to live for free. That monthly mortgage payment was going to kill my lifestyle. After working 15 years in the banking industry, one thing was clear to me. It’s not about how much money you make rather It’s about how much you keep. I knew that millionaire next door was real and I wanted to be him.

Naturally, I bought the ugliest house on the nicest street. Made sure I could turn that single-family house into a small apartment building. My plan was to live in one unit and rent the others out. Even though I had a plan, I had no clue how I would bring it all together.

Far from a handyman but determined with knowledge, good credit, and stable income. Off to the races I went to find a lender to give me enough money to convert my garage into a living space so I could rent it out. That would allow me to live for free, pay down my mortgage, and still get all the other benefits of real estate ownership.

Because I knew what I was doing and did not mean that the person I was asking to borrow money from did too.

Your job is to process information and decide if it’s true or not.

Taking opinions as facts can kill your dreams before you even wake up. Logical decision-making is not something that’s taught in most educational settings but should be. Take in the information provided and process it so you can decide what to do with it.

If I had a dollar for every time someone told me something wrong, I’d have a lot of dollars.

Avoid these 3 mistakes when searching for ADU financing.

#1. Only talk to big banks

Local lenders have unique programs to fit their community needs. When you walk into the bank or credit union first find out what types of loan programs they offer.

Then get specific about what real estate, secured, and unsecured financing programs they offer.

Lastly, ask about their underwriting and qualification criteria. (Find out what they need to see from you on paper to give you the money!)

#2. Taking your first No as an absolute

Every lender has a different box they try to fit you in. Based on their needs and wants. Just like you.

Not everyone looks at the same qualification criteria. Requests the same information, or even uses the same credit bureaus.

You need to understand what the lenders are looking for and then decide if there’s a way for you to fit in or not.

#3. Asking for the wrong thing

You need to communicate what you will be using the money for. How you will be using the money. Also, where and when will you be using the money.

Be prepared to provide supplementary information. Documents such as a resume, business plan, scope of work, project schedule, and summary.

The information you provide will help the lender better understand your loan request. The goal is for your lender to understand the entire picture of you and your loan request.

To do so you must provide them with everything they ask for and more! At the end of the day, you want to get to a loan decision quickly as possible. So you can decide if it’s good enough for you.

Get the financing and move on to the next part of your project because the money is out there just depends on how much you are willing to pay for it.

the ADU Dude

All things Real Estate, budgeting, and Finance.