Why These Special Property Rules Matter
You found this guideline because your property doesn't fit the standard single-family home mold. Maybe you're buying a house with a basement apartment, a property that spans two lots, or a home with solar panels. These situations require extra documentation and specific eligibility requirements.
Fannie Mae created these rules to manage risk while still allowing financing for properties that serve legitimate housing needs. Each special property type presents unique challenges for appraisal, insurance, and resale value.
Accessory Dwelling Units: The Basement Apartment Rules
An ADU is a separate living space on the same property as your main home. Think basement apartments, garage conversions, or small detached units. The ADU must have its own kitchen, bathroom, sleeping area, and living space.
Your lender will classify your property based on how the ADU functions. A basement apartment with its own entrance and utilities might make your property a duplex rather than a single-family home with an ADU. The appraiser determines this classification in the Highest and Best Use section of the appraisal.
If your ADU is a manufactured home, you need specific documentation. The appraiser must photograph the HUD Data Plate and HUD Certification Labels. Without these photos in the appraisal, your loan cannot be sold to Fannie Mae.
Zoning creates another layer of complexity. Some ADUs existed before current zoning laws and are considered legal nonconforming. If your ADU violates current zoning, your lender must confirm that its existence won't void your property insurance coverage.
Multiple Parcels: When Your Property Spans Two Lots
Some properties consist of multiple parcels of land. Your waterfront home might sit on one lot with a separate lot providing beach access. Or your house might straddle the property line between two parcels.
All parcels must be conveyed together in the sale. They must be adjoined unless separated by a road, and the separated parcel must be non-buildable. Your lender needs evidence that the separated parcel cannot have another structure built on it.
Each parcel must have the same basic zoning classification. You cannot combine a residential lot with a commercial lot. The entire property can contain only one dwelling unit, though non-residential improvements like garages are acceptable.
Your mortgage must be a valid first lien on all parcels. This means the title work becomes more complex, and your lender must ensure proper lien positioning across multiple legal descriptions.
Mixed-Use Properties: Living Above Your Business
Mixed-use properties combine residential and business use. You might run a daycare from your home, operate a beauty salon in a converted garage, or have a medical practice in part of your house.
You must live in the property as your primary residence and personally operate the business. You cannot rent space to another business owner. The property must remain primarily residential in character and marketability.
Your lender will scrutinize any modifications to ensure they don't hurt the property's appeal to future residential buyers. A home office is fine, but converting your living room into a commercial kitchen might create problems.
Hawaiian Lava Zones: Geography Determines Eligibility
Properties on Hawaii's Big Island face unique geological risks. Fannie Mae only finances properties in lava zones 3 through 9. Properties in zones 1 and 2 face too high a risk of destruction from lava flows.
Your lender will verify the lava zone designation using U.S. Geological Survey maps. This information must be documented in your loan file. Properties in restricted zones cannot be financed with conventional loans that Fannie Mae will purchase.
Solar Panels: Ownership Structure Affects Your Appraisal
Solar panels complicate property financing because ownership structures vary widely. You might own the panels outright, lease them, finance them separately, or have a power purchase agreement.
If you own the panels, they can add value to your property appraisal. Owned panels include those you bought with cash, financed through your mortgage, or paid off completely. Your lender treats these like any other home improvement.
Leased panels or power purchase agreements create different requirements. The monthly lease payment counts toward your debt-to-income ratio unless the lease transfers with the property sale. These panels cannot add value to your appraisal because you don't own them.
Separately financed panels require careful documentation. Your lender must determine whether the panels are collateral for other debt. A UCC search might be necessary to confirm ownership status and lien priority.
Required Documentation for Special Properties
ADU properties require standard appraisal documentation plus verification of legal status. Your lender needs zoning confirmation and, for manufactured ADUs, photos of HUD certification labels.
Multiple parcel properties need title reports covering all parcels, evidence of non-buildable status for separated parcels, and zoning verification for each parcel. The mortgage documents must properly describe all parcels.
Mixed-use properties require business license documentation, zoning compliance verification, and detailed property descriptions showing residential character. Your lender may need additional insurance documentation.
Solar panel properties require ownership documentation, financing agreements, UCC searches when ownership is unclear, and title reports showing any recorded liens. Power purchase agreements and lease documents must be reviewed and included in your file.
Common Problems That Derail These Loans
ADU properties often fail when zoning violations surface during underwriting. An unpermitted basement apartment can kill your loan if local authorities could force its removal. Insurance companies sometimes exclude coverage for illegal ADUs.
Multiple parcel properties create title complications. Liens, easements, or restrictions affecting one parcel can impact the entire loan. Separated parcels must clearly demonstrate non-buildable status with official documentation.
Mixed-use properties face appraisal challenges when business modifications hurt residential marketability. A home converted for commercial use might not appraise for residential value. Business income cannot be used for qualification unless it meets standard self-employment requirements per B3-3.1-09: Other Sources of Income.
Solar panel financing creates the most confusion. Borrowers often don't understand their ownership structure. PACE loans must be paid off before closing, and separately financed panels might prevent first lien position for your mortgage.
References
For the official guidelines, see B2-3-04: Special Property Eligibility Considerations in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B2-3-04, Special Property Eligibility Considerations (10/08/2025)
Properties with Solar Panels
Uniform Appraisal Dataset (UAD) 3.6 Policy
Accessory Dwelling Units
An ADU is typically an additional living area independent of the primary dwelling that may have been added to, created within, or detached from a primary one-unit dwelling. The ADU must provide for living, sleeping, cooking, and bathroom facilities and be on the same parcel as the primary one-unit dwelling.
The following table describes the requirements for classifying an ADU.
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See
for the requirements that need to be satisfied in order to include rental income in qualifying.
Construction of an ADU
The construction method of an ADU can be site- or factory-built, including modular, and single- or multi-width HUD Code manufactured homes that are legally classified as real property. If an ADU is present, the primary dwelling must be site-built or a modular home. If the ADU is a HUD Code manufactured home, the lender must verify the following:
the property was built in compliance with the Federal Manufactured Home Construction and Safety Standards (established June 15, 1976, as amended and in force at the time the home was manufactured),
it is attached to a permanent foundation system in accordance with the manufacturer’s requirements for anchoring, support, stability, and maintenance,
the foundation system must be appropriate for the soil conditions for the site and meet local and state codes,
it is encumbered by the mortgage with the primary dwelling, and
additional requirements that appear in HUD regulations in 24 C.F.R. Part 3280.
Compliance with these standards must be evidenced by photos of the HUD Data Plate or HUD Certification Label(s) (for each section of the home) in the appraisal. If the original or alternative documentation cannot be obtained for the HUD Data Plate or the HUD Certification Label(s), the loan is not eligible for sale to Fannie Mae. See
, for more information.
Examples of ADUs
Examples of ADUs include, (but are not limited to):
a living area over a garage,
a living area in a basement,
a small addition to the primary dwelling, or
a manufactured home (legally classified as real property).
Whether a property is defined as a one-unit property with an ADU or a two- to four-unit property will be based on the characteristics of the property, which may include, but are not limited to, the existence of separate utility meter(s), a unique postal address, and whether the unit can be legally rented. The appraiser must determine compliance with this definition as part of the analysis in the Highest and Best Use section of the appraisal. See
for additional ADU appraisal requirements.
Zoning for an ADU
Some ADUs may predate the adoption of the local zoning ordinance and therefore be classified as legal nonconforming. An ADU should always be considered legal if it is allowed under the current zoning code for the subject property.
If it is determined that the property contains an ADU that is not allowed under zoning (where an ADU is not allowed under any circumstance), the property is eligible under the following additional conditions:
The lender confirms that the existence will not jeopardize any future property insurance claim that might need to be filed for the property.
The appraisal requirements related to zoning for an ADU are met. See
Multiple Parcels
The table below provides the requirements when the security property consists of more than one parcel of real estate.
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Multiple Parcels Requirements
Each parcel must be conveyed in its entirety.
Parcels must be adjoined to the other, unless they comply with the following exception. Parcels that otherwise would be adjoined, but are divided by a road, are acceptable if the parcel without a residence is a non-buildable lot (for example, waterfront properties where the parcel without the residence provides access to the water). Evidence that the lot is non-buildable must be included in the loan file.
Each parcel must have the same basic zoning (for example, residential, agricultural).
The entire property may contain only one dwelling unit. Limited additional non-residential improvements, such as a garage, are acceptable. For example, the adjoining parcel may not have an additional dwelling unit. An improvement that has been built across lot lines is acceptable. For example, a home built across both parcels where the lot line runs under the home is acceptable.
The mortgage must be a valid first lien that covers each parcel.
Mixed-Use Properties
Fannie Mae purchases or securitizes mortgages that are secured by properties that have a business use in addition to their residential use, such as a property with space set aside for a day care facility, a beauty or barber shop, or a doctor’s office.
The following special eligibility criteria must be met:
The property must be a one-unit dwelling that the borrower occupies as a principal residence.
The borrower must be both the owner and the operator of the business.
The property must be primarily residential in nature.
The dwelling may not be modified in a manner that has an adverse impact on its marketability as a residential property.
See
, for appraisal considerations.
Hawaiian Lava Zones
Fannie Mae will only purchase or securitize mortgage loans secured by properties that are located within lava zones 3 through 9 on the island of Hawaii. Properties in lava zones 1 and 2 are not eligible due to the increased risk of property destruction from lava flows within these areas.
Hawaiian lava flow maps and other information are available online at the U.S. Geological Survey Hawaiian Volcano Observatory website.
Properties with Solar Panels
The ownership and debt financing structures commonly found with solar panels are key to determining whether the panels are third-party owned, personal property of the homeowner, or a fixture to the real estate. Common ownership or financing structures include:
borrower-owned panels,
leasing agreements,
separately financed solar panels (where the panels serve as collateral for debt distinct from any existing mortgage); or
power purchase agreements.
Fannie Mae will purchase or securitize a mortgage loan on a property with solar panels. If the borrower is, or will be, the owner of the solar panels (meaning the panels were a cash purchase, were included in the home purchase price, were otherwise financed and repaid in full, or are secured by the existing first mortgage), our standard requirements apply (for example, appraisal, insurance, and title).
Properties with solar panels and other energy efficient items financed with a PACE loan are not eligible for delivery to Fannie Mae if the PACE loan is not paid in full prior to or at closing. For additional information, see
.
Lenders are responsible for determining the ownership and any financing structure of the subject property’s solar panels in order to properly underwrite the loan and maintain first lien position of the mortgage. When financing is involved, lenders may be able to make this determination by evaluating the borrower’s credit report for solar-related debt and by asking the borrower for a copy of all related documentation for the loan. The lender must also review the title report to determine if the related debt is reflected in the land records associated with the subject property. If insufficient documentation is available and the ownership status of the panels is unclear, no value for the panels may be attributed to the property value on the appraisal unless the lender obtains a Uniform Commercial Code (UCC) “personal property” search that confirms the solar panels are not claimed as collateral by any non-mortgage lender.
Note: A UCC financing statement that covers personal property and is not intended as a “fixture filing” must be filed in the office identified in the relevant state’s adopted version of the UCC.
Lenders are responsible for ensuring the appraiser has accurate information about the ownership structure of the solar panels and that the appraisal appropriately addresses any impact to the property’s value. Separately financed solar panels must not contribute to the value of the property unless the related documents indicate the panels cannot be repossessed in the event of default on the associated financing. Any contributory value for owned or financed solar panels must comply with Energy Efficiency Improvements in
.
The following table summarizes some of the specific underwriting criteria that must be applied depending on the details of any non-mortgage financing for the solar panels.
If the solar panels are...
Then the lender must...
Financed and collateralized -- the solar panels are collateral for the separate debt used to purchase the panels, but they are a fixture to the real estate because a UCC fixture filing* has been filed for the panels in the real estate records
Financed and collateralized -- the solar panels are reported to be collateral for separate (non-mortgage) debt used to purchase the panels, but do not appear on the title report
*A fixture filing is a UCC-1 financing statement authorized and made in accordance with the UCC adopted in the state in which the related real property is located. It covers property that is, or will be, affixed to improvements to such real property. It contains both a description of the collateral that is, or is to be, affixed to that such property, and a description of such real property. It is filed in the same office that mortgages are recorded under the law of the state in which the real property is located. Filing in the land records provides notice to third parties, including title insurance companies, of the existence and perfection of a security interest in the fixture. If properly filed, the security interest in the described fixture has priority over the lien of a subsequently recorded mortgage.
If the solar panels are leased from or owned by a third party under a power purchase agreement or other similar lease arrangement, the following requirements apply (whether to the original agreement or as subsequently amended).
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Lender Requirements for Properties with Solar Panels that are Leased or Covered by a Power Purchase Agreement
The lender must obtain and review copies of the lease or power purchase agreement.
The monthly lease payment must be included in the DTI ratio calculation unless the lease is structured to
Payments under power purchase agreements where the payment is calculated solely based on the energy produced may be excluded from the DTI ratio.
The value of the solar panels cannot be included in the appraised value of the property.
The value of the solar panels must not be included in the LTV ratio calculation, even if a precautionary UCC filing is recorded because the documented lease or power purchase agreement status takes priority.
The value of the solar panels must not be included in other debt secured by real estate in the CLTV ratio calculation because the documented lease or power purchase agreement status takes priority.
The property must maintain access to an alternate source of electric power that meets community standards.
The lease or power purchase agreement must indicate that
Any exceptions to coverage on the title insurance policy for recorded instruments relating to the solar panels must comply with
.
Uniform Appraisal Dataset (UAD) 3.6 Policy
Lenders using UAD 3.6 must follow the requirements in the .
SEL-2020-04
