The ADU Interest Rate Buydown Program helps lower interest rates on loans made to eligible low- and moderate-income borrowers in connection with the construction or conversion of ADUs.
Program Benefits
The ADU Interest Rate Buydown Program offers funds to lenders that will make the funds available to Residential Borrowers to permanently buy down interest rates for mortgage loans to support the construction or conversion of ADUs to be occupied by Residential Borrowers and/or their tenants. Note: This program does not provide financing for the actual loan itself.
Eligible Lenders and Use of Funds
- Eligible lenders include banks, credit unions, for-profit lenders, nonprofit lenders, and community development financial institutions (CDFIs).
- Licensed mortgage lending organizations holding a current National Multistate Licensing System (NMLS) license and approved to do business in Colorado by the Secretary of State are eligible for the program.
- Proceeds must fund a permanent interest rate buydown of either a fixed-rate home equity loan or a cash-out refinance first mortgage loan to a residential borrower for the new construction of an ADU or the conversion of a non-ADU building or space into a habitable ADU on the residential borrower’s property.
- The maximum permanent interest rate buydown available per transaction under the program is $25,000.
- Home Equity Lines of Credit (HELOCs) and temporary interest rate buydowns do not qualify for the program.
- Eligible projects must be located in an ADU Supportive Jurisdiction. Information regarding the location of ADU Supportive Jurisdictions can be found on the Colorado Division of Local Government (DLG) website.
An ADU, as defined by C.R.S. 29-35-402, is an internal, attached, or detached dwelling unit that provides complete independent living facilities for one or more individuals, is located on the same lot as a proposed or existing primary residence, and includes facilities for living, sleeping, eating, cooking, and sanitation.
Affordability Requirements
- Lenders must income-qualify ADU borrowers at or below 140 percent of the statewide Area Median Income (AMI), currently $174,440, prior to loan closing, as established by CHFA.
Application Process
Applications will be accepted on a first-come, first-served basis until funds are depleted. Eligible lenders may contact CHFA Home Finance to begin the application process and receive complete program guidelines.
