What Is The CalHFA Grant?



What Is The CalHFA Grant?

After the Covid-19 Pandemic and shutdown, it was necessary for an economic recovery plan to be put in action. The $100 billion California Come Back Plan was enacted into law by Governor Newsom. This was done in an effort to accelerate California's economic recovery. The main issues facing California, such as the financial struggles of the middle class and the worsening homelessness epidemic, are being addressed through this legislation. This package included funding for a sizable ADU grant

program (CalHFA grant program). The CalHFA grant gives low-income households in California the chance to access up to $40,000 in funding for ADU pre-construction costs.

To qualify for the grant, You must sign an affidavit certifying that you currently occupy the house as well as be on the deed. It doesn't matter how long the property has been owned, but the primary residence must be occupied while the ADU is being constructed. This is because the loan is not for investors, it’s designed for

homeowners. There are also income limits to receive the ADU grant that vary by county.

Application Process

  1. The homeowner submits an application for a construction financing with a lender who has been approved and completes the CalHFA ADU grant paperwork.
  2. Construction loan is approved by the lender, prequalifying the homeowner for the CalHFA ADU funding.
  3. Predevelopment work starts, funded by the construction loan account. Lender provides CalHFA the ADU Grant application packet, which also includes a breakdown of expenses.


4. Grant funds are wired to the loan account, and construction begins.

A loan for the construction of your ADU is required before you can receive the grant. The loan you take out must come from a lender who has been pre-approved, and it can be for any amount that will pay for the remaining costs involved in developing your ADU. Your credit score and ability to pay the loaned amount will determine how much money you receive in the loan. Through the grant, up to $40,000 of this debt may be repaid. According to the CalHFA website, “Predevelopment costs rolled into construction loan for no or minimal upfront costs to homeowners,” showing that the grant is essentially free to apply for. But, according to the IRS, a 1099 form will be filed for the amount of the grant.

Check Out Our Gallery Of ADU’s and Additions

Recommended Pre Approved Lenders For The CalHFA Grant

Loan Depot


Caliber Home Loans

Flagstar Bank


CMG Mortgage Inc.


American Pacific Mortgage

Guild Mortgage

Supreme Lending


Priority Financial Network


MLD Mortgage


Other Ways To Finance Your New ADU

There are numerous programs that assist homeowners in funding their new ADU project. These programs assist homeowners in refinancing or obtaining entirely new mortgages that will be based exclusively on the increased value of the home following improvements. You may be able to finance an ADU in California with a HELOC loan if you have a mortgage on your house but some equity thanks to rising home values. A home equity line of credit allows you to retain


your primary mortgage in place while also receiving a credit line from the bank, which effectively serves as a second mortgage. The Home Equity Line Of Credit (HELOC) loan is the most common loan used by homeowners to fund their ADU project.

Another option is a cash out refinance. The first mortgage is replaced by a new one in a cash-out refinance, and some of the equity in your house is taken out as cash that can be used to pay for construction. The procedure is quite like a traditional mortgage refinance, but you would refinance for a higher amount rather than for the same amount as your present mortgage. Your current loan will be repaid with this, plus you'll also get extra money for your renovation, ADU, or garage conversion project. Essentially, if you have equity in your house, you can pull it out as cash.

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