The Headlines
- HB24-1152 (signed May 13, 2024) created two separate ADU funding streams worth $13M total. They are not the same program.
- The Colorado Housing and Finance Authority (CHFA) administers an $8M ADU Finance Program that routes loans through participating lenders to low- and moderate-income (LMI) homeowner-borrowers. Three sub-programs: Relending, Credit Enhancement, and Interest Rate Buydown.
- The $5M ADU Grant Program (ADUG), administered by the Colorado Department of Local Affairs (DOLA), goes to local governments, not homeowners. Homeowners benefit indirectly through pre-approved plans and fee waivers in cities that win awards.
- Eligibility for CHFA programs requires the property to sit in a city DOLA has certified as an ADU Supportive Jurisdiction. Check the live list before assuming you qualify.
- Prop 123 funds do not flow to market-rate homeowner ADUs. Prop 123 supports deed-restricted affordable units administered through nonprofits and local governments.
- Conventional products still cover most ADU projects: Home Equity Line of Credit (HELOC), cash-out refi, single-close construction-to-perm, and renovation loans (Fannie HomeStyle, Federal Housing Administration 203(k), Freddie CHOICERenovation).
- Fannie Mae SEL-2025-10 (effective March 31, 2026) expanded HomeStyle Renovation for detached ADUs and allowed up to 50% upfront disbursement at closing. Material change for modular ADU buyers paying factory deposits.
- Of the five major Front Range cities, only Denver has a substantial city-level homeowner program (the West Denver Renaissance Collaborative Single-Family Plus, or WDRC SF+, ADU Program, with up to $85K savings in exchange for an affordability covenant). Boulder, Fort Collins, Colorado Springs, and Broomfield offer no dedicated ADU homeowner construction financing.
Olerra builds modular ADUs in Colorado. We are not a lender. The intent of this article is to give you accurate information about your options so you can have a sharper conversation with a lender. Rate quotes change weekly, and your situation determines which product fits. Where we cite numbers (loan amounts, interest rates), we use ranges with "as of June 2026" qualifiers. Verify with the lender or program administrator before you commit.
For the cost side of the equation, the covers what an ADU actually costs to build. This article covers how to pay for it.
The Colorado ADU Programs Created by HB24-1152
HB24-1152, the 2024 Colorado ADU law, did two things at once. The zoning piece mandates that qualifying Colorado cities allow ADUs by right; see the city rules links in the city-by-city section below. The financing piece appropriated $13M to two separate funding streams. Most coverage of HB24-1152 conflates these two streams. They are different programs with different eligibility, different routing, and different beneficiaries. The table below makes the distinction concrete.
Stream 1: CHFA ADU Finance Programs ($8M, for homeowner-borrowers)
The Colorado Housing and Finance Authority (CHFA) administers $8M in three sub-programs aimed at making ADU financing accessible to low- and moderate-income homeowners.
ADU Relending Program. CHFA loans funds to eligible nonprofits, public housing authorities, and Community Development Financial Institutions (CDFIs), which then on-lend to homeowner-borrowers. Launched December 2025. The relending route is the right path if you are pursuing financing through a community lender rather than a traditional bank.
ADU Credit Enhancement Program. CHFA provides credit enhancement to participating lenders, which lets those lenders extend loans to low- and moderate-income borrowers they otherwise would not approve. Rolling out to lenders in early 2026 and reaching borrowers through spring and later in 2026.
ADU Interest Rate Buydown Program. CHFA subsidizes the interest rate on loans to eligible LMI borrowers, lowering the monthly payment over the life of the loan. Same lender rollout timeline as Credit Enhancement.
Who qualifies. Two preconditions: the borrower must be low- to moderate-income (specific Area Median Income, or AMI, percentages set by CHFA at the lender level), and the property must be located in a city or county DOLA has certified as an ADU Supportive Jurisdiction. The certified list updates as cities apply, so check the live list before assuming you qualify.
How to apply. Through a CHFA participating lender, not directly to CHFA. The lender determines program fit based on your income, credit, and property location. For the Relending path, work with a participating nonprofit or CDFI.
Verify current borrower-level terms (income caps, max loan amounts, buydown size) at . CHFA publishes these terms through participating lenders rather than as a static fact sheet.
Stream 2: DOLA ADU Grant Program (ADUG) ($5M, for local governments)
The Department of Local Affairs (DOLA) administers $5M in grants. These grants go to local governments, not to homeowners. The point of the program is to help cities cover the costs of pre-approved ADU plans, technical assistance to applicants, and fee waiver or reduction programs.
How homeowners benefit. Indirectly. If your city wins ADUG funding, you may see lower permit fees, free or subsidized pre-approved ADU designs, or expedited review. The benefit comes through your city, not as a direct subsidy you apply for.
Round 1 awards (November 2025). DOLA awarded seven jurisdictions: Grand Junction, Superior, Larimer County, Glenwood Springs, Fruita, Brighton, and Longmont. None of the five major Front Range cities (Denver, Boulder, Fort Collins, Colorado Springs, Broomfield) received Round 1 funding.
Round 2. Application window opened in early 2026 with a deadline extension. Awards have begun rolling out. Fort Collins is reported to have received Round 2 funding to support its Pre-approved ADU Program and Fee Waiver work. Verify current Round 2 awardees and your city’s status before drawing conclusions.
Proposition 123: What It Actually Covers
Proposition 123 (passed November 2022) is Colorado’s affordable housing financing measure. It directs roughly 0.1% of state taxable income to affordable housing without raising taxes. Funds split 60% to the Colorado Office of Economic Development and International Trade (OEDIT) Affordable Housing Financing Fund, and 40% to the DOLA Affordable Housing Support Fund.
What Prop 123 funds. Affordable, income-restricted housing. Projects must be in a jurisdiction that has signed a Local Government Affordable Housing Commitment with DOLA, and they must serve households at or below specific AMI thresholds.
What Prop 123 does NOT fund. Market-rate homeowner ADUs. If you are building a detached ADU to rent at market rate, use as a guest house, or house family informally, Prop 123 dollars are not available to you. Prop 123 supports the affordable-housing pipeline (developers, nonprofits, community land trusts) and locally administered deed-restricted ADU programs.
The narrow path. If you deed-restrict your ADU at 75% AMI rent caps with renters at 100% AMI or less for a minimum 5-year term, you may become eligible for locally administered affordable ADU programs that draw on Prop 123. The trade-off is real: long-term affordability covenants limit your rental income and resale flexibility.
Current status flag. As of spring 2026, Colorado Sun reporting suggests many local governments may be barred from receiving Prop 123 funding due to a 2022 ballot provision requiring 3% per year affordable housing unit growth. Legislative fix is in progress. If a Prop 123-linked program is part of your financing plan, verify the program’s funding status before committing.
Conventional ADU Financing Products
Most Colorado ADU projects in 2026 will still be financed using one of four conventional products. The right one depends on how much equity you have, what your current mortgage rate looks like, and whether you are doing new construction or renovation.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit secured by your home equity. You draw what you need, when you need it, and pay interest only on the drawn balance. Variable rate.
Rate context (June 2026). National average HELOC rate is about 7.4%. Colorado-active lenders advertise ranges from 8% to 15% depending on credit, loan-to-value, and lender. Many Colorado credit unions (Partner Colorado, Elevations, Bellco, Canvas, Ent) offer HELOCs to local borrowers. Specific advertised rates change weekly.
Best fit. Homeowners with significant equity who want flexibility on draw timing, and who can absorb variable-rate risk. HELOC is particularly well-suited to ADU projects with phased construction or where total cost is uncertain at the outset.
Trade-offs. Variable rate means your payment moves with the market. If the Fed cuts rates in 2026 as widely projected, HELOC rates will follow downward, but the reverse is also true. Many HELOCs have a 10-year draw period followed by a 10- or 20-year repayment period.
Cash-Out Refinance
A cash-out refi replaces your current mortgage with a larger one and gives you the difference in cash. Fixed rate (typically), single payment going forward.
Rate context (June 2026). Colorado 30-year fixed mortgage rates average about 6.5%. Cash-out refi rates typically run 25 to 75 basis points above rate-and-term refi rates, so figure 6.75% to 7.25% for a cash-out depending on credit and loan-to-value (LTV).
Best fit. Homeowners with substantial equity AND a current mortgage rate higher than today’s market rate. If you bought at 7%+ in 2023 or 2024, refinancing into mid-6s while pulling cash for an ADU may net out to lower monthly cost.
Bad fit. Homeowners with locked-in sub-4% pandemic-era mortgages. Refinancing into a 6.5% to 7% rate to pull cash for an ADU will almost always cost more in lifetime interest than a HELOC or construction loan that leaves your existing mortgage intact.
Construction Loans (Single-Close and Two-Close)
Construction loans cover the build phase, with funds disbursed in draws as construction progresses. Two structures.
Single-close construction-to-permanent (OTC). One loan, one closing. Starts as a construction loan during the build, converts to a permanent mortgage on completion. Available in Colorado through FHA, Department of Veterans Affairs (VA), US Department of Agriculture (USDA), Department of Housing and Urban Development section 184 (HUD-184), and conventional structures. FHA OTC accepts 3.5% down with a 580+ credit score. Conventional OTC typically requires 10% to 20% down with a 680+ credit score.
Two-close. Separate construction loan during build, then a second closing to refinance into a permanent mortgage. More paperwork, two sets of closing costs, but flexibility on choosing the permanent loan based on conditions at completion.
Critical caveat for ADU borrowers. ADU-specific construction loan availability is uneven. Some Colorado credit unions explicitly exclude ADUs and granny flats from their construction loan products. You must ask any lender directly: "Do you finance ADU construction on an already-owner-occupied lot?" Get that answer in writing before paying for an application.
Renovation Loans
Three federal-backed renovation loan products touch ADUs. The nuance matters because each treats new construction versus renovation differently.
Fannie Mae HomeStyle Renovation. The most ADU-friendly renovation product in 2026. Selling Guide Announcement SEL-2025-10 (December 2025, effective March 31, 2026) expanded ADU eligibility to allow up to three ADUs on single-unit properties where zoning permits, plus ADUs on manufactured homes. The same update permits upfront disbursement of up to 50% of renovation costs at closing for materials, permits, design fees, and deposits. For modular ADU buyers paying factory deposits before delivery, this is a material change.
Freddie Mac CHOICERenovation. Allows ADUs (attached or detached), and CAN finance new detached ADU construction. The constraint is on rental-income qualifying: for new detached ADUs, projected rental income may not be used to qualify the borrower. For attached ADUs and renovation of existing detached ADUs, projected rental income may be used. Read the eligibility carefully or ask your lender to walk through the income-qualification rules for your specific configuration.
FHA 203(k). The least ADU-friendly of the three. FHA 203(k) covers attached ADU creation (basement conversion, garage conversion, addition) and renovation of existing detached ADUs. New-construction detached ADUs are NOT eligible under 203(k). FHA has a separate new-construction product, but it is not the 203(k) renovation loan.
Modular-Specific ADU Financing
Colorado has a meaningful and growing modular ADU market. Olerra builds in this category. Financing modular ADUs is different from financing site-built ADUs in three ways that lenders do not always handle smoothly.
Factory deposit draws. Modular ADUs require a meaningful deposit to the factory before the unit ships. Site-built construction loans typically disburse based on on-site progress (foundation, framing, MEP, finishes), so a factory-deposit-first model does not fit cleanly. Fannie HomeStyle’s new 50% upfront disbursement rule (SEL-2025-10) is the cleanest match for modular. Two-close construction loans can also work because the lender approves the construction schedule before closing.
HUD code vs. state code. Modular ADUs in Colorado are typically built to state code (the same building code applied to site-built homes) rather than the federal HUD manufactured housing code. This is a meaningful distinction for lenders. Some lenders are set up for HUD-code manufactured homes but not state-code modular. Others are the reverse.
Lender ADU acceptance. On top of the modular question, the lender must finance ADUs at all, which not every Colorado lender does.
Three questions to ask any lender about modular ADU financing. (1) Do you finance ADU construction on an already-owner-occupied lot? (2) Can your draw schedule accommodate factory deposits paid before on-site delivery? (3) Is your product set up for state-code modular construction (not just HUD-code manufactured)? Get all three answers before paying for an application.
The Rocky Mountain Home Association maintains a directory of Colorado lenders experienced with manufactured and modular homes at . Read product pages carefully, then call to confirm ADU acceptance.
City-by-City: Local Programs in the Front Range
Local ADU homeowner financing programs are scarcer than the city websites and aggregator blogs suggest. Of the five major Front Range cities, only Denver operates a substantial city-area program for homeowners. The other four have nothing dedicated to ADU homeowner construction financing as of June 2026. We are being honest about this because conflating "city has a housing program" with "city has an ADU homeowner financing program" leads to wasted application time.
Denver
West Denver Renaissance Collaborative (WDRC) SF+ ADU Program. The most substantial city-area ADU homeowner program in Colorado. Administered by the Denver Housing Authority’s planning team. Originally limited to 9 west Denver neighborhoods, now citywide.
Cost reductions. Up to $85,000 in savings depending on unit size, model, and household income, in exchange for a long-term affordability covenant on the ADU.
Eligibility. Existing Denver homeowner with ADU-eligible zoning, 2+ years in the neighborhood, owner-occupant at time of application, must qualify for financing. Open to all income levels, but maximum subsidy goes to income-qualified homeowners.
Designs. Seven pre-approved detached ADU designs ranging from studio to 3 BR. Construction partner is Habitat for Humanity of Metro Denver. Lender partners include First Bank, Huntington Bank, and UMB Bank.
Trade-off to absorb. The $85K savings comes with a long-term affordability covenant. Average rent on a Habitat-built ADU in this program is around $800 per month. If your financial model depends on market-rate rent ($1,800 to $2,400 in most Denver neighborhoods), the WDRC program may not pencil despite the subsidy.
Program details at . Full Denver ADU rules in , and Denver-specific cost breakdowns in .
Boulder
The honest finding. Boulder has no city-administered ADU homeowner construction financing program.
Affordable ADU Program. A regulatory incentive, not financing. If you deed-restrict your ADU at 75% AMI rent for 5 years, Boulder allows a larger size (1,000 sq ft detached / 1,200 sq ft attached vs. 800 sq ft for market-rate). No direct subsidy. The trade is size for affordability.
H2O down payment assistance. Boulder’s H2O (House to Homeownership) program is a homeownership program (income up to 120% AMI, loans up to $100K), not an ADU construction product. It could in principle be combined with an ADU purchase transaction, but it is not designed for ADU construction financing.
What Boulder homeowners use. HELOC, cash-out refi, construction loan, or Fannie HomeStyle through a participating lender. CHFA ADU Finance Programs are available if Boulder is certified as an ADU Supportive Jurisdiction at the time you apply (check the live DOLA list).
Full Boulder ADU rules in , and Boulder-specific cost breakdowns in .
Fort Collins
The honest finding. Fort Collins has no standalone city-administered ADU homeowner construction loan program. But Fort Collins is doing more on the support and process side than most Front Range cities.
ADUG Round 2 award. Fort Collins is reported to have received ADUG Round 2 funding to support its Pre-approved ADU Program and Fee Waiver Support work. This benefits homeowners indirectly through reduced fees and free or subsidized pre-approved designs, not as a direct loan or grant.
Lender activity. Several Fort Collins-area credit unions are underwriting projected ADU rental income on construction loan applications, which can improve qualifying capacity for owners planning long-term rental. Verify with the specific lender before assuming.
What Fort Collins homeowners use. HELOC, cash-out refi, construction loan, or renovation loan through a participating lender. CHFA ADU Finance Programs are available subject to ADU Supportive Jurisdiction certification status.
Full Fort Collins ADU rules in , and Fort Collins-specific cost breakdowns in .
Colorado Springs
The honest finding. Colorado Springs has no city-administered ADU homeowner financing or grant program in 2026.
CHFA program access. Colorado Springs is a Subject Jurisdiction under HB24-1152. Whether the city is currently certified as an ADU Supportive Jurisdiction (the precondition for resident access to CHFA ADU Finance Programs) is a status you must verify on the live DOLA list immediately before applying. If Colorado Springs is not yet certified, the CHFA path is closed to Springs residents at that moment.
What Colorado Springs homeowners use. HELOC, cash-out refi, construction loan, Fannie HomeStyle, or other conventional products. The conventional options are the entire ballgame in Springs as of June 2026.
Full Colorado Springs ADU rules in , and Springs-specific cost breakdowns in .
Broomfield
The honest finding. Broomfield has no city-administered ADU homeowner financing program. Broomfield’s housing programs portal covers general housing assistance but not ADU-specific construction.
CHFA program access. Broomfield is a Subject Jurisdiction. Verify ADU Supportive Jurisdiction certification status before applying. Broomfield adopted its full ADU ordinance (Ord 2265) in September 2025, so the zoning compliance baseline is in place.
What Broomfield homeowners use. Conventional products are the practical answer in 2026. HELOC, cash-out refi, construction loan, Fannie HomeStyle, Freddie CHOICERenovation, or FHA 203(k) for attached ADU creation.
Full Broomfield ADU rules in .
Choosing the Right Product for Your Situation
The right financing product depends on three variables: how much equity you have, what your current mortgage rate looks like, and what kind of ADU you are building.
If you have substantial equity and a low locked-in mortgage rate
HELOC is usually the right answer. It lets you draw what you need without disturbing your existing mortgage. Variable rate is the trade-off, but in a falling-rate environment (which most analysts expect for late 2026), variable rate is less concerning than it was in 2023 to 2024.
If you have equity and your current mortgage rate is above today’s market rate
Cash-out refi is worth modeling. If you bought at 7%+ in 2023 or 2024 and current rates are mid-6s, refinancing into a lower rate while pulling cash for an ADU can net out positively. Run the numbers on lifetime interest, not just monthly payment.
If you are building from scratch with limited equity
A single-close construction-to-permanent loan is usually the cleanest path. FHA OTC accepts 3.5% down for qualifying borrowers. Conventional OTC typically requires 10% to 20% down. Both convert to a permanent mortgage on completion.
If you are doing a renovation or interior conversion
Fannie HomeStyle Renovation is the most flexible product in 2026, particularly after the SEL-2025-10 changes (effective March 31, 2026) that allow 50% upfront disbursement at closing. Freddie CHOICERenovation is also strong but read the rental-income qualifying rules carefully if your ADU model depends on rental income to qualify the borrower.
If you qualify as low- to moderate-income
Apply to a CHFA ADU Finance Program through a participating lender. The Interest Rate Buydown can lower monthly payments materially over the life of the loan. Confirm your city is a certified ADU Supportive Jurisdiction first.
If you are building modular
Ask the three modular-specific questions before applying with any lender. Fannie HomeStyle’s 50% upfront disbursement is the cleanest fit for factory deposits. Two-close construction loans are also workable.
If you are building a deed-restricted affordable ADU
Talk to your city’s housing department about programs that draw on Prop 123. Denver’s WDRC SF+ ADU is the largest. Boulder’s Affordable ADU Program offers regulatory incentives (size, not subsidy). The trade is long-term affordability covenants for upfront cost reduction.
Common Misconceptions
"The CHFA program and the ADUG grant are the same thing." No. CHFA ADU Finance Programs ($8M) route loans through lenders to homeowner-borrowers. ADUG ($5M) routes grants to local governments to support pre-approved plans and fee waivers. Homeowners do not apply for ADUG directly.
"Prop 123 funds will pay for my detached ADU." Only if you deed-restrict the unit at 75% AMI rent and accept long-term affordability covenants. Prop 123 does not fund market-rate homeowner ADUs.
"My city has an ADU program because their website mentions ADUs." A city ADU page describing zoning rules is not the same as a city ADU financing program. Of the five major Front Range cities, only Denver runs a substantial city-area homeowner program (WDRC SF+).
"Any construction loan finances ADUs." Not true. Some Colorado lenders explicitly exclude ADUs from their construction loan products. Ask before applying.
"FHA 203(k) finances new detached ADUs." No. FHA 203(k) covers attached ADU creation and renovation of existing detached ADUs. New detached ADU construction is not eligible under 203(k).
"I can use projected ADU rental income to qualify on any loan." Depends on the loan and the ADU configuration. Freddie CHOICERenovation restricts rental income qualifying for new detached ADUs. Fannie HomeStyle is more flexible. Each lender applies the rules differently. Ask.
How Olerra Builds
Olerra is a Colorado modular ADU builder. We work primarily in detached configurations across the Front Range. We are not a lender, do not arrange financing on your behalf, and do not receive compensation from lenders for steering homeowners to specific products.
Our role in the financing conversation is to give lenders accurate construction-cost estimates, accurate timelines, and accurate factory deposit schedules so your lender can underwrite the loan correctly. We have worked with Fannie HomeStyle, cash-out refi, HELOC, and two-close construction loan structures on past projects. We can walk you through how each works in practice with our build process.
Our process is documented at and we are happy to do a no-cost financing-aware feasibility conversation. when you are ready.
Frequently Asked Questions
Is there a single state-run ADU loan program in Colorado?
Yes and no. HB24-1152 created the CHFA ADU Finance Programs ($8M) administered through participating lenders. There is no single "go to chfa.com and apply" portal for homeowners. You apply through a CHFA participating lender, which determines program fit (Relending, Credit Enhancement, or Interest Rate Buydown).
What is the difference between HB24-1152 and ADUG?
HB24-1152 is the underlying 2024 statute. It created two separate funding streams: the $8M CHFA ADU Finance Programs (for homeowner-borrowers) and the $5M ADUG grant (for local governments). ADUG dollars do not flow to homeowners directly.
Is there a Colorado SB 233 ADU bill?
No. There is no Colorado SB 233 that touches ADUs. SB24-233 is a property-tax reform bill, unrelated. The actual Colorado ADU statute is HB24-1152. If you have seen "SB 233" referenced in connection with ADUs, the source likely transcribed the bill number incorrectly.
Can I use Prop 123 funds to pay for a market-rate ADU?
No. Prop 123 funds affordable, income-restricted housing only. Market-rate homeowner ADUs are not eligible. If you deed-restrict the unit at 75% AMI rent for a multi-year period, you may become eligible for locally administered programs that draw on Prop 123.
What is the typical interest rate on a Colorado ADU loan in June 2026?
Depends on the product. HELOC averages about 7.4% (variable). Cash-out refi runs roughly 6.75% to 7.25% (fixed). Construction loans vary by lender, structure, and credit. Verify current rates with the specific lender before committing.
Can I use a HELOC to finance a modular ADU?
Yes, if your equity supports it. HELOC has no lender ADU-exclusion or modular-acceptance issues because the underlying collateral is your existing home, not the ADU. You draw funds and use them however you want. The trade-off is variable rate.
Does FHA 203(k) finance new detached ADUs?
No. FHA 203(k) covers attached ADU creation (basement, garage, addition) and renovation of existing detached ADUs. New detached ADU construction is not eligible under 203(k). FHA has separate new-construction loan products, but they are not 203(k).
What changed with Fannie Mae HomeStyle Renovation in 2026?
Selling Guide Announcement SEL-2025-10 (December 2025, effective March 31, 2026) expanded HomeStyle for ADUs: up to three ADUs on single-unit properties where zoning permits, ADUs on manufactured homes, and up to 50% upfront disbursement at closing for materials, permits, design fees, and deposits. The 50% upfront disbursement is the key change for modular ADU buyers paying factory deposits.
What questions should I ask a lender about ADU construction loans?
(1) Do you finance ADU construction on an already-owner-occupied lot? (2) Can your draw schedule accommodate factory deposits paid before on-site delivery (if modular)? (3) Is your product set up for state-code modular construction or only HUD-code manufactured? (4) Do you allow projected ADU rental income to qualify the borrower? Get answers in writing before paying for an application.
Does my city have an ADU financing program?
Of the five major Front Range cities, only Denver runs a substantial city-area homeowner program (WDRC SF+ ADU). Boulder, Fort Collins, Colorado Springs, and Broomfield offer no dedicated ADU homeowner construction financing. They offer ADU-supportive infrastructure (pre-approved plans, fee waivers, regulatory simplification) at varying levels but not direct loans or grants to homeowners.
How do I check if my city is an ADU Supportive Jurisdiction?
DOLA maintains a live certified list at dlg.colorado.gov/adu-supportive-jurisdictions. Certification is the precondition for resident access to CHFA ADU Finance Programs. The list updates as cities apply, so check immediately before assuming you qualify.
Where to Start
Start with the question that matters most: what is the right product for your situation? Modeling the answer takes 30 minutes and an honest conversation with a lender who finances ADUs in Colorado.
If you want a construction-cost estimate, factory deposit schedule, or timeline to bring to a lender conversation, Olerra can produce those numbers from a short feasibility chat. Send us your zip code and lot details and we will tell you what a realistic Olerra modular ADU build looks like.
when you are ready to start the financing conversation with accurate cost and timeline numbers.
