Georgia Home Loans: Financing a Property with an Illegal ADU in Georgia

Across cities like Atlanta, Savannah, Augusta, and fast-growing suburbs throughout the state, more homebuyers are purchasing properties with Accessory Dwelling Units (ADUs). These can be basement apartments, garage conversions, backyard cottages, or in-law suites. But what happens when the ADU is considered “illegal” by the local municipality?

We offer options that may allow financing of a primary single-family residence (SFR) with an illegal ADU, as long as specific guidelines are met.

What Is an ADU?

An Accessory Dwelling Unit (ADU) is a secondary living space located on the same property as the primary residence. In Georgia, zoning and permitting requirements vary by city and county, which means some ADUs may exist without proper municipal approval. It typically includes:

• A kitchen
• A full bathroom
• A separate entrance
• Independence from the main dwelling

ADUs are commonly used for:

• Multigenerational living
• Rental income
• Guest housing
• Long-term investment strategies

Can You Finance a Home in Georgia with an Illegal ADU?

Yes, under certain conditions. We may allow financing of a primary single-family residence with an ADU considered illegal by the local municipality if it meets the following requirements:

It Must Meet the Definition of a True ADU

The unit must:

• Be smaller in size than the primary residence
• Include a kitchen, bathroom, and separate entrance
• Be independent of the main dwelling
• Contribute less to the overall property value than the primary home

The ADU must clearly be secondary to the main home, not the dominant structure.

The Appraiser Must Support Marketability

To demonstrate that the property is acceptable in the marketplace:

• The appraiser must use at least two comparable sales (comps)
• Those comps must also include properties with ADUs
• The analysis must support that homes with ADUs are marketable in the area

This ensures the value is supported and that there is demand for similar properties in that specific Georgia neighborhood.

Important Considerations

Every file is reviewed carefully. The property must still:

• Be structurally sound
• Meet general safety standards
• Pass appraisal review
• Comply with loan program guidelines

Contact us for more information.