To qualify, applicants must have owned and occupied the main property for at least five years, maintain a credit score above 650 and have a debt-to-income ratio below 40 percent.
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The city of Pasadena, California has introduced a second round for its Pasadena Second Unit ADU Program, which offers homeowners financial incentives to build affordable rental units on their properties, according to the city.
Through the Pasadena Second Unit ADU Program, homeowners can receive up to $225,000 in three-year construction loans to finance the design, permits and overall construction of a new accessory dwelling unit (ADU), or “granny flat.”
The funds may also be used to rehabilitate and bring an unpermitted “granny flat” or illegal ADU conversion — a garage or back house — up to code.
“Granny flats” are self-contained residential units that share the same lot as a primary dwelling. The units have long provided affordable housing options for extended family members and adult children, and an extra source of income for those who are renting the space out.
However, their popularity grew in the wake of the recent Los Angeles wildfire crisis, which left many residents across Pasadena, and near tje Eaton Canyon in the San Gabriel Mountains without homes.
Legal changes implemented within the last year have also made it easier to utilize ADUs.
The construction loan programs includes:
• 3-year term loan at 1 percent simple interest with deferred payments
• Loan secured by trust deed on the homeowners property
• 5-year affordability housing covenant required for the ADU
• Parcel with no more than one unit existing on property
• Main house occupied by owner
• Coverage of design, permits and construction costs
• Rental of ADU exclusively to Pasadena rental assistance households for seven (7) continuous years
To qualify, applicants must have owned and occupied the main property for at least five years, maintain a credit score above 650 and have a debt-to-income ratio below 40 percent. Their combined loan-to-value ratio must be under 80 percent of the home’s value, and they cannot have an existing city loan.
All household members must be U.S. citizens or permanent residents.
Applicants who are selected for the program will have 20 days to submit the required loan documentation for lender verification and loan package preparation. The application window closes on Feb. 28 at 10 p.m.
Email Richelle Hammiel