MassHousing’s New ADU Loan Program: What Homeowners Need to Know for 2026

Massachusetts has been steadily removing barriers to ADU production—updating zoning, expanding technical assistance, and building real momentum. But one obstacle hasn’t changed much: financing.

In March 2026, MassHousing is launching a new ADU Loan Program (ADULP)  designed to support low and moderate-income homeowners who want to build an ADU on the property where they already live. These loans econd mortgages of up to $250,000

This program matters, not because it’s flashy, but because it’s structured around what actually makes ADU projects succeed: a clear flow, lender participation, and getting projects to “dig ready” before moving forward on financing the project.

What is ADULP?

ADULP is a lender-enabled construction/renovation loan that helps homeowners use existing equity to build an ADU, paired with a matching 0% deferred loan through MassHousing.

Together, the program can support total borrowing of up to $250,000, depending on eligibility and underwriting.

The concept is straightforward: use conventional lending infrastructure, but reduce the immediate cost burden for qualifying homeowners—so an ADU can move from “someday” to “possible.”

One key detail: “Dig Ready” isn’t optional

If you’ve been around ADUs long enough, you’ve seen the same failure point: a homeowner gets excited, spends money early, and then the project stalls when permitting, utilities, or contractor pricing turns out to be more complicated—or more expensive—than expected.

ADULP is explicitly designed to prevent that.

Before the loan can be locked in, the project needs to be “Dig Ready.” In practice, that means the essential pre-development pieces are already in place: a defined scope, plans/specs, permits, and the key documentation lenders will require to underwrite and manage construction funds responsibly.

Common “Dig Ready” components can include:

  • a signed contractor agreement and draw/disbursement schedule

  • Licensed and insured contractor credentials 

  • plans and specifications

  • permits (or a confirmed path to permits) and other required approvals

  • site/utility readiness items

  • septic/Title V 

  • feasibility study 

From a builder and program-design standpoint, this is one of the most important guardrails in the product.

FAQs homeowners ask right away

A few questions come up every time a construction-style ADU loan enters the market:

  • Can I be my own general contractor?
    In many cases, yes—if you’re properly licensed as a GC.

  • Can sweat equity count?
    Typically, sweat equity doesn’t count as renovation cost. Materials for homeowner-completed work may be eligible; labor generally isn’t.

  • Can lenders charge inspection or monitoring fees?
    Yes. Reasonable inspection and monitoring fees may be part of construction oversight.

Why Backyard ADUs is paying attention

We work at the intersection of homeowners, municipalities, builders, and lenders. When financing products are designed around how ADUs actually get built, you don’t just get more applications, you get more completions.

ADULP’s dig-ready requirement, escrow-style controls, contingency expectations, and clearly defined lender role create the kind of structure that makes ADUs more repeatable and less risky—especially for households who have been priced out of the “cash + HELOC + patience” path.

And as Massachusetts continues investing in technical assistance and market infrastructure, financing like this becomes the backbone that helps those efforts translate into real homes.

What to do next if you’re considering an ADU in 2026

If you think you may be a fit for ADULP, the most productive early move is not picking finishes—it’s getting to Dig Ready:

  • Confirm feasibility (zoning + site constraints)

  • Get early clarity on utilities

  • Develop a real scope and plans/specs

  • Line up a qualified contractor

  • Make the permit path real, not assumed

That’s the difference between an ADU idea and an ADU project.

Deanna Duffey – Partnerships Associate, Backyard ADUs

Deanna Duffey supports partnerships and policy at Backyard ADUs, working alongside Liz Trice to build and maintain relationships with local governments, nonprofits, and lenders—and to grow the programs that make ADUs simpler to permit, finance, and build. Based in Portland, she’s known for an operations-first approach that keeps coalition work moving and turns ideas into execution.

#MassHousing #ADUs #HousingAffordability #SmartGrowth #ModularHomes #PolicyMatters

Deanna Duffey