A straight answer
Can I count basement apartment rent when I buy a house in Utah?
The direct answer
Yes. Fannie Mae allows rental income from one accessory dwelling unit on a one-unit home you live in, and a Utah basement apartment can be that unit. I offer the purchase loan and put the financing together. I'm Zach von der Linden (NMLS 1652805), a mortgage broker with West Capital Lending, based in San Clemente.
It does not have to be a legal duplex. A one-unit house with one accessory unit stays a one-unit house under both Fannie Mae's and FHA's rules, and both let the lender count the unit's rent with limits. Utah law makes an internal accessory unit a permitted use in residential zones, but a legal Utah ADU does not by itself make the rent count: the lender's rules do that. Text or call me with the city, whether the unit is permitted, whether it is rented now and whether you will live upstairs. I have been licensed in Utah for ten years, and I work with buyers in California, Utah, Oregon and Arizona.
Zach von der Linden, mortgage broker and Branch Manager, West Capital Lending · NMLS 1652805
Wholesale pricing · California, Utah, Oregon and Arizona
5.0 across 66 reviews on Experience.com (read on 2026-09-24) · Text reaches Zach directly · Last updated 2026-10-17
Buying a Utah house with a basement apartment? Text me the city, whether the unit is permitted, whether it is rented now and whether you will live upstairs.
No credit pull happens from a text or a call. Texts and calls go to Zach's cell.
What happens after you text me?
Texts go straight to my cell, and I answer them myself when I'm free. I'll ask for the few details that actually matter, tell you whether the structure looks worth pursuing, and explain the next step. If I don't think the loan fits, I'll tell you that too.
A text or phone conversation does not pull your credit.
What Utah law says about a basement apartment
Utah calls a basement apartment inside an owner-occupied house an internal accessory dwelling unit. The statute says that "In any area zoned primarily for residential use: the use of an internal accessory dwelling unit is a permitted use," and that, with listed exceptions, a city "may not establish any restrictions or requirements for the construction or use of one internal accessory dwelling unit within a primary dwelling," including rules about "the size of the internal accessory dwelling unit in relation to the primary dwelling," "total lot size," "street frontage," or "internal connectivity" (Utah Code 10-21-303, effective November 6, 2025).
The definitions matter. An internal accessory dwelling unit is one created "within a primary dwelling," "within the footprint of the primary dwelling" at the time it is created, and "for the purpose of offering a long-term rental of 30 consecutive days or longer." A primary dwelling is a single-family dwelling that "is detached" and "is occupied as the primary residence of the owner of record" (Utah Code 10-21-101). The state's Property Rights Ombudsman gives "a basement apartment" as its example of an attached ADU.
The city still has a say. The statute lets a city require "a permit or license for renting an internal accessory dwelling unit," require that the unit "does not change the appearance of the primary dwelling as a single-family dwelling," require one additional parking space in stated cases, bar a separate utility meter, prohibit rentals "for a period of less than 30 consecutive days," and prohibit renting the unit at all "if the internal accessory dwelling unit is located in a dwelling that is not occupied as the owner's primary residence." A city may also keep internal units out of zoning districts covering a limited share of its residential land, and out of homes on small lots or with a failing septic tank, within figures the statute sets. "An internal accessory dwelling unit shall comply with all applicable building, health, and fire codes."
So the first question I ask is not about the loan. It is whether the city has a rental license or permit on file for the unit, and whether the unit was built with permits. A basement that was finished without permits, or a unit in a city district that does not allow one, is a different file from a licensed apartment with a tenant.
A legal Utah ADU is not the same as mortgage eligibility
Utah law tells the city what it must allow. It does not tell a lender what rent to count. Those are two different rulebooks, and the loan is written under the second one.
Fannie Mae's guide describes an ADU as "typically an additional living area independent of the primary dwelling," with its own living, sleeping, cooking and bathroom facilities on the same parcel as the house, and it lists "a living area in a basement" among the examples, alongside a living area over a garage and a small addition (Fannie Mae Selling Guide B2-3-04). The guide says "Some ADUs may predate the adoption of the local zoning ordinance and therefore be classified as legal nonconforming," treats a unit allowed under current zoning as legal, and allows a property whose unit is not allowed under any zoning only under added conditions. Whether the unit can be legally rented is one of the facts the lender uses to classify the property.
The appraiser reports what the unit is, whether it is permitted, and what it would rent for. The lender reads that report against the guide. A unit the appraiser cannot call legal, or cannot call rentable, is a unit whose rent is not counted, however finished the basement is.
What Fannie Mae counts, and the limits
Fannie Mae's general rental income topic says "Fannie Mae does allow certain exceptions to this policy for boarder income and rental income on principal residence properties with accessory units." The subject-property topic spells them out. Rental income is eligible from a "one-unit Accessory Dwelling Unit (ADU) allowed with a one-unit primary residence only," and three limits apply: "Rental income is only allowed from one existing ADU." "Purchase or limited cash-out refinance transactions only." And the qualifying rental income from the ADU is capped at a share of your total qualifying income, a figure the guide sets and this page does not print (Fannie Mae Selling Guide B3-3.8-02).
Existing means existing. A basement you plan to convert after closing is not an existing ADU, and its future rent does not count on the purchase.
For a purchase the lender obtains "a Single-Family Comparable Rent Schedule (Form 1007)" from the appraiser, "and a copy of the fully executed lease agreement(s) when a lease is being transferred to the borrower." The lender also "must document the borrower's current housing payment to use any rental income from the subject property in qualifying," so where you live now, and what you pay, is part of the file.
Then the experience rule. Fannie Mae lets a lender use positive rental income as qualifying income only when the borrower "has at least 12 months of property management experience," shown on a tax return with Schedule E or by a lease at least twelve months old. With less experience, the rent is used only to offset the home's own payment, which still helps, but differently. A first-time landlord buying a house with a basement apartment is usually in that second group, and I tell you which group you are in before we count anything. The departing-residence rent answer covers the same rule from the other side.
What FHA counts
FHA's definition is close to Fannie Mae's: an ADU is "a single habitable living unit with means of separate ingress and egress" that is "subordinate in size and can be added to, created within, or detached from a primary one-unit Single Family dwelling, which together constitute a single interest in real estate." And "A Single Family residential one-unit Property with a single ADU remains a one-unit Property" (HUD Handbook 4000.1, II.A.1.b.iv(B)(4)).
HUD says "Rental Income from the subject Property may be considered Effective Income when the Property is or will be a one-unit dwelling with an ADU." With no rental history, the lender documents the proposed rent from the ADU with the appraisal report and "a Fannie Mae Form 1007/Freddie Mac Form 1000, Single Family Comparable Rent Schedule, showing fair market rent and, if available, the prospective leases." The lender then uses a share of the lesser of the appraiser's rent or the lease rent, and caps the ADU income at a share of your total effective income; both shares are figures in the Handbook and are not printed here.
Two more FHA rules. When ADU rent is used to qualify, the lender "must verify and document Reserves equivalent to two months’ PITI after closing," so you need money left after closing. And on a cash-out refinance, "rental income from the ADU cannot be used as Effective Income." HUD also notes that "A renter of an ADU is not a Boarder," so the separate boarder-income rules do not apply to a tenant in the apartment.
Does it have to be a legal duplex?
No. A house with one accessory unit is a one-unit property with an ADU under both rulebooks. A legal duplex is a two-unit property, and two- to four-unit principal residences have their own rental income rules, their own appraisal form, and their own down payment and reserve rules in the program.
The difference shows up in the city's records and the appraisal. If the county and city treat the building as two units, it is appraised and underwritten as a duplex. If it is a single-family home with a licensed internal unit, it is a one-unit with an ADU. I ask which one the city has on file before the appraisal is ordered, because the wrong form costs time.
What to text Zach
- The city the house is in, and whether you will live in the main part of the home.
- Whether the basement apartment has a rental license or permit from the city, and whether it was finished with building permits.
- Whether it is rented now, and the lease if there is one.
- Whether you have owned or managed a rental before, and for how long.
- What you pay for housing now.
Documents go through the secure process I give you when we talk, not by ordinary text. A conversation does not pull your credit. I am based in San Clemente and have been licensed in Utah for ten years; Utah is a big part of my work.
Questions people ask next
Does the basement apartment have to be permitted for the rent to count?
In practice, yes. The appraiser reports whether the unit is legal and rentable, and the lender counts rent only from a unit it can classify as an accessory dwelling unit under its rules. A finished basement without permits, or a unit the city does not allow, is not counted. Utah law makes an internal unit a permitted use in residential zones, but the city can still require a permit or rental license.
Does it have to be a legal duplex?
No. A one-unit house with one accessory unit stays a one-unit property under both Fannie Mae and FHA, and both allow the unit's rent to count with limits. A legal duplex is a two-unit property with its own rules.
How much of the basement rent counts?
Not all of it. Fannie Mae caps the ADU's qualifying rent at a share of your total qualifying income, and FHA uses a share of the appraised or lease rent and caps the ADU income at a share of your total effective income. Those shares are figures in the guides, and I read them against your file rather than print them.
I have never been a landlord. Does the rent still count?
With less than twelve months of property management experience, Fannie Mae lets the lender use the rent only to offset the home's own payment rather than as added income. That still helps your ratios. With twelve months or more, shown on a tax return or an older lease, positive rent can be qualifying income.
Can I count rent from a basement I will finish after closing?
Not on the purchase. Fannie Mae allows rental income only from one existing ADU, and the lender documents the rent with the appraiser's rent schedule and any lease being transferred. A planned conversion is a renovation conversation, not rental income.
Can I rent the basement apartment nightly?
Utah defines an internal accessory dwelling unit as one offered for a long-term rental of 30 consecutive days or longer, and a city may prohibit rentals of less than 30 days. Fannie Mae also does not allow short-term rental income from an ADU. Count on monthly rent or none.
Does FHA let me count the basement rent?
Yes, with limits. HUD treats a one-unit home with a single ADU as a one-unit property, lets the lender count rent documented by the appraisal and a comparable rent schedule, caps the ADU income at a share of your total effective income, requires two months of payments in reserve when that rent is used, and does not allow the rent on a cash-out refinance.
What clients say
Zach was so easy to work with. He made a stressful situation into a very positive experience for us and did push us one way or another. He listened to what we hoped we could accomplish and made it happen.
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Sources and checked dates
Sources: Utah Code 10-21-303, Internal accessory dwelling units (effective 11/6/2025), and 10-21-101, Definitions (effective 7/1/2026) (checked 2026-10-17) · Utah Office of the Property Rights Ombudsman, Accessory Dwelling Units (checked 2026-10-17) · Fannie Mae Selling Guide, B2-3-04 (10/08/2025), B3-3.8-01 and B3-3.8-02 (09/02/2026) (checked 2026-10-17) · Fannie Mae Selling Guide, B3-3.8-01, General Rental Income Information (checked 2026-10-17) · Fannie Mae Selling Guide, B3-3.8-02, Rental Income from the Subject Property (checked 2026-10-17) · Fannie Mae Selling Guide, B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental (checked 2026-10-17) · HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (revised August 12, 2026; lenders must apply the changes by November 10, 2026), II.A.1.b.iv(B)(4), II.A.4.c.xii(I), II.A.4.d and II.A.8.d (checked 2026-10-17) · Zach von der Linden, statement to this site (2026-10-16) (checked 2026-10-16) · Supplied by Zach, September 9, 2026 (checked 2026-09-09).
Show each claim on this page, what it depends on, and the date it was checked (10)
| What we say, and what it depends on | Source | Checked |
|---|---|---|
| Utah Code 10-21-303, Internal accessory dwelling units (effective 11/6/2025; formerly 10-9a-530): "(1) In any area zoned primarily for residential use: (a) the use of an internal accessory dwelling unit is a permitted use;" and, with stated exceptions, "a municipality may not establish any restrictions or requirements for the construction or use of one internal accessory dwelling unit within a primary dwelling, including a restriction or requirement governing: (i) the size of the internal accessory dwelling unit in relation to the primary dwelling; (ii) total lot size; (iii) street frontage; or (iv) internal connectivity". "(2) An internal accessory dwelling unit shall comply with all applicable building, health, and fire codes." "(3) A municipality may:" "prohibit the installation of a separate utility meter", "require that an internal accessory dwelling unit be designed in a manner that does not change the appearance of the primary dwelling as a single-family dwelling", require one additional on-site parking space in stated circumstances, "require the owner of a primary dwelling to obtain a permit or license for renting an internal accessory dwelling unit", prohibit creation within zoning districts covering a limited share of the municipality's residential land (shares stated in the statute), prohibit creation "if the primary dwelling is served by a failing septic tank" or if the lot is at or below a size the statute states, "prohibit the rental or offering the rental of an internal accessory dwelling unit for a period of less than 30 consecutive days", and "prohibit the rental of an internal accessory dwelling unit if the internal accessory dwelling unit is located in a dwelling that is not occupied as the owner's primary residence". Utah Code 10-21-101 (effective 7/1/2026): "“Internal accessory dwelling unit” means an accessory dwelling unit created: (a) within a primary dwelling; (b) within the footprint of the primary dwelling described in Subsection (16)(a) at the time the internal accessory dwelling unit is created; and (c) for the purpose of offering a long-term rental of 30 consecutive days or longer." "“Primary dwelling” means a single-family dwelling that: (i) is detached; and (ii) is occupied as the primary residence of the owner of record." | Utah Code 10-21-303, Internal accessory dwelling units (effective 11/6/2025), and 10-21-101, Definitions (effective 7/1/2026) | 2026-10-17 |
| The Utah Office of the Property Rights Ombudsman (Utah Department of Commerce) describes an accessory dwelling unit as "a complete secondary residential unit that can be added to a single-family residential lot", gives "a basement apartment" as an example of an attached ADU, and describes an internal ADU as "an ADU created within a primary dwelling for the purpose of offering a long-term rental of 30 consecutive days or longer" in "a detached, single-family home occupied as the primary residence of the owner of record", "a permitted use in any area zoned primarily for residential use in a county or municipality, subject to certain restrictions", citing Utah Code 10-21-303 for municipalities and 17-80-303 for counties. | Utah Office of the Property Rights Ombudsman, Accessory Dwelling Units | 2026-10-17 |
| Fannie Mae Selling Guide B2-3-04, Special Property Eligibility Considerations (10/08/2025), Accessory Dwelling Units: "An ADU is typically an additional living area independent of the primary dwelling" with its own living, sleeping, cooking and bathroom facilities, on the same parcel as the primary one-unit dwelling; examples include "a living area in a basement", a living area over a garage, a small addition, and a fourth example, a housing type Zach does not place loans on, that this site does not describe. "Some ADUs may predate the adoption of the local zoning ordinance and therefore be classified as legal nonconforming." An ADU allowed under current zoning is legal; where an ADU is not allowed under any zoning circumstance the property can still be eligible under added conditions, including confirmation that the unit will not jeopardize a future insurance claim; whether the unit can be legally rented is one factor in classifying the property, with rental income qualification in Section B3-3.8. B3-3.8-01, General Rental Income Information (09/02/2026): "Fannie Mae does allow certain exceptions to this policy for boarder income and rental income on principal residence properties with accessory units." B3-3.8-02, Rental Income from the Subject Property (09/02/2026): eligible is a "one-unit Accessory Dwelling Unit (ADU) allowed with a one-unit primary residence only." "The following limitations apply to properties with ADUs:" "Rental income is only allowed from one existing ADU." "Purchase or limited cash-out refinance transactions only." The qualifying rental income from the ADU is limited to a stated share of the total qualifying income (figure not printed). For a purchase the lender obtains "a Single-Family Comparable Rent Schedule (Form 1007)" "and a copy of the fully executed lease agreement(s) when a lease is being transferred to the borrower," and "must document the borrower's current housing payment to use any rental income from the subject property in qualifying." | Fannie Mae Selling Guide, B2-3-04 (10/08/2025), B3-3.8-01 and B3-3.8-02 (09/02/2026) | 2026-10-17 |
| Fannie Mae Selling Guide B3-3.8-01, General Rental Income Information (09/02/2026; Announcement SEL-2026-08 moved rental income into a new Section B3-3.8): "Rental Income is an acceptable source of stable income if it can be established that the income is likely to continue." "The amount of rental income used to qualify may be restricted depending on whether the borrower currently has a housing payment and/or a history of property management experience." "Lenders may only use positive rental income for qualifying income if the borrower(s) has at least 12 months of property management experience." "The lender may only use qualifying rental income to offset the PITIA when the borrower(s) has no prior property management experience, or less than 12 months of experience." Experience is shown by the most recent signed federal return with Schedules 1 and E "reflecting rental income received for any property and supporting 365 Fair Rental Days;" or "a fully executed lease agreement dated at least 12 months prior to the loan application date, provided the related property has not yet been reported on individual or business federal tax return(s)." "Example: If a short-term rental has been in service for more than one year but Schedule E reflects fewer than 365 Fair Rental Days in each tax year, or if the property was out of service during the prior year, Schedule E must support this with a reduced number of Fair Rental Days and related repair costs." A lease may be used for a purchase "where there is an existing lease agreement(s) on the property that will be transferred to the borrower;" and newly executed leases on properties not on the return "must contain a minimum term of at least six months, with the initial rental payment due on or before the first payment due date of the subject mortgage." | Fannie Mae Selling Guide, B3-3.8-01, General Rental Income Information | 2026-10-17 |
| Fannie Mae Selling Guide B3-3.8-02, Rental Income from the Subject Property (09/02/2026): for a purchase, "The lender must obtain the following: a Single-Family Comparable Rent Schedule (Form 1007) or Small Residential Income Property Appraisal Report (Form 1025), as applicable, and a copy of the fully executed lease agreement(s) when a lease is being transferred to the borrower." "The lender must document the borrower's current housing payment to use any rental income from the subject property in qualifying." "If the current market rents do not reasonably support the gross rents reported on the lease agreement, the lender must" determine whether more documentation is needed, provide a written analysis, "or use the lesser amount." Net rental income is the gross rent reduced by a stated share for vacancy and expenses, less the property's full payment. "When the borrower has less than 12 months of rental property management experience if ANRI is positive, the lender may use the rental income to offset the PITIA only." Eligible: "two-to four-unit principal residences, or one-to four-unit investment property, or one-unit Accessory Dwelling Unit (ADU) allowed with a one-unit primary residence only." | Fannie Mae Selling Guide, B3-3.8-02, Rental Income from the Subject Property | 2026-10-17 |
| Fannie Mae Selling Guide B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental (09/02/2026): "A short-term rental is a furnished, residential property rented for brief periods, typically less than 30 consecutive days, rather than with a standard long-term lease agreement." "The following properties are eligible: One-unit investment properties only. The property must be legally permitted to operate as a short-term rental, including compliance with all applicable local registration and licensing requirements. Short-term rental income cannot be derived from an ADU." Purchase: "The Single-Family Comparable Rent Schedule (Form 1007) must be completed based on standard long-term rentals, or The lender must obtain validated rental data for other short-term rentals from Multiple Listing Service (MLS), or property management companies." "Validated rental data must include: three comparable short-term rental properties," from the same market area when possible, "daily, weekly, and/or monthly rental rates for these comparables; number of days rented in the last calendar year;" The purchase calculation reduces the monthly gross rental amount by a stated share for vacancy losses and maintenance expenses, then subtracts the property's full payment, and "If ANRI is positive, the lender may use the rental income to offset the PITIA only. If ANRI is negative, the lender must include the amount in the DTI ratio." Refinance: "The most recent individual federal income tax return (IRS Form 1040), which include Schedules 1 and E, regardless of whether the subject property is listed on the tax return." | Fannie Mae Selling Guide, B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental | 2026-10-17 |
| HUD Handbook 4000.1 (revised August 12, 2026). II.A.1.b.iv(B)(4), Accessory Dwelling Unit: "An Accessory Dwelling Unit (ADU) refers to a single habitable living unit with means of separate ingress and egress that meets the Minimum Requirements for Living Unit. An ADU is a private space that is subordinate in size and can be added to, created within, or detached from a primary one-unit Single Family dwelling, which together constitute a single interest in real estate." "A Single Family residential one-unit Property with a single ADU remains a one-unit Property." II.A.4.c.xii(I), Rental Income (TOTAL) (11/10/2026): "Rental Income from the subject Property may be considered Effective Income when the Property is or will be a one-unit dwelling with an ADU, a two- to four-unit dwelling, or an acceptable one- to four-unit Investment Property." For a one-unit with an ADU and limited or no history, "The Mortgagee must verify and document the proposed Rental Income from the ADU by obtaining a Fannie Mae Form 1004/Freddie Mac Form 70, Uniform Residential Appraisal Report (URAR), and a Fannie Mae Form 1007/Freddie Mac Form 1000, Single Family Comparable Rent Schedule, showing fair market rent and, if available, the prospective leases." The effective income uses a stated share of the lesser of the appraiser's fair market rent or the lease rent, and "The amount of the Rental Income from an ADU used as Effective Income must not exceed" a stated share "of the total monthly Effective Income used to qualify the Borrower." "A renter of an ADU is not a Boarder." II.A.4.d, Asset Requirements: "If Rental Income is being used as Effective Income to qualify the Borrower, the Mortgagee must verify and document Reserves equivalent to two months’ PITI after closing for one-unit with an ADU Properties." II.A.8.d, Refinances: "If the subject Property is a one-unit with an Accessory Dwelling Unit (ADU), rental income from the ADU cannot be used as Effective Income to qualify for a cash-out refinance." | HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (revised August 12, 2026; lenders must apply the changes by November 10, 2026), II.A.1.b.iv(B)(4), II.A.4.c.xii(I), II.A.4.d and II.A.8.d | 2026-10-17 |
| Zach has been licensed in Utah for ten years. | Zach von der Linden, statement to this site (2026-10-16) | 2026-10-16 |
| Zach is based in San Clemente, California, visits Utah often and has many friends there. | Zach von der Linden, statement to this site (2026-10-16) | 2026-10-16 |
| Zach reports placing loans through more than one wholesale lender and program via his broker channel: the standard home equity line described on this site, plus conventional, government, bank statement and investment-property options. Individual lender names are kept off the public pages until the executed broker agreement for each is on file (California 10 CCR 2848(a)(3)). | Supplied by Zach, September 9, 2026 | 2026-09-09 |
Written for and accountable to: Zach von der Linden, Mortgage broker and Branch Manager, West Capital Lending.
Last updated 2026-10-17.
Verify him: NMLS Consumer Access, ID 1652805 · 66 reviews on Experience.com.
Sources for product claims are listed on this page, with the date each was checked.