Question 1

What is the cheapest way to finance an ADU in Sacramento?

Accepted Answer

The most cost-effective approach is to combine the CalHFA ADU Grant ($40,000 for pre-development costs) with a HELOC for construction costs. HELOCs typically offer the lowest rates and most flexible terms for ADU projects. If your ADU is 749 sqft or less, you'll also save ~$12,000 in waived impact fees.

Question 2

Can I get an ADU loan with no equity in my home?

Accepted Answer

Yes — construction loans are based on the after-renovation value (ARV) of your property, not your current equity. FHA 203(k) loans also allow low down payments (3.5%). Some ADU builders also offer in-house financing or payment plans.

Question 3

Is the CalHFA $40,000 ADU grant still available in 2026?

Accepted Answer

The CalHFA ADU Grant Program has been funded through multiple fiscal years. Check calhfa.ca.gov/adu for current availability. The grant reimburses pre-development costs including permits, design, engineering, soil tests, and impact fees. It's a true grant — no repayment required.

Question 4

Can I use ADU rental income to qualify for the loan?

Accepted Answer

Some lenders will count projected ADU rental income (typically 75% of market rent) toward your debt-to-income ratio when qualifying for a loan. This is more common with construction loans and ARV-based lending. Ask your lender specifically about ADU income qualification.

Question 5

How much does an ADU increase my property taxes in Sacramento?

Accepted Answer

Under Proposition 13, your existing home's assessed value doesn't change. Only the new ADU construction triggers a supplemental assessment — typically $100–$300/month in additional property taxes depending on the ADU's value. This is far less than the rental income an ADU generates.

Option	Rate	Max Amount	Best For
Home Equity Line of Credit (HELOC)Recommended	7.5% – 10% variable	Up to 85% of home equity	Homeowners with 20%+ equity
Cash-Out Refinance	6.5% – 8% fixed	Up to 80% of home value	Homeowners who want a fixed rate
Construction Loan	8% – 12% during construction	Based on after-renovation value (ARV)	Custom builds without existing equity
FHA 203(k) Renovation Loan	6.5% – 8% fixed	Based on after-improvement value	Buyers or refinancers adding an ADU
CalHFA ADU Grant ProgramRecommended	0% — it's a grant, not a loan	Up to $40,000	All California homeowners building an ADU
Home Equity Loan (Second Mortgage)	7% – 10% fixed	Up to 85% of home equity	Homeowners wanting a fixed-rate lump sum

How to Finance Your Sacramento ADU: Loans, Grants & Options

ADU Financing Options at a Glance

Detailed Breakdown of Each Option

Pros

Cons

CalHFA ADU Grant: Up to $40,000 Free

ADU Financing FAQ

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