Thinking about adding an accessory dwelling unit to your Chevy Chase property but not sure how to pay for it or where to start? You’re not alone. An ADU can create flexible living space and long-term value, yet it comes with rules, permits, and financing choices that can feel complex. This guide breaks down your options, the local process in Montgomery County, and the steps to move from idea to approved project with confidence. Let’s dive in.
What counts as an ADU in Chevy Chase
An accessory dwelling unit is a self-contained living space on the same lot as your primary home. In Montgomery County, ADUs can be attached, inside the house, or detached. Most ADUs built or converted after 2013 must be licensed through the County’s Department of Housing and Community Affairs.
To understand licensing requirements and the application process, review the County’s Accessory Dwelling Unit licensing page from Montgomery County DHCA.
Key rules you must follow
- One ADU per lot. The ADU must be subordinate in size and share the same street address as the main home. See the County’s ADU standards in the Montgomery County zoning code.
- Owner occupancy. You must live in either the main home or the ADU, subject to the County’s owner-occupancy provisions and licensing checks.
- Parking. Additional on-site parking is expected unless your lot qualifies for a transit-area exception or you obtain a waiver.
- No short-term rentals. ADUs are not eligible for short-term rental use under County rules.
- Municipal variations. Parts of Chevy Chase are incorporated towns, such as the Town of Chevy Chase and Chevy Chase Village. Local codes may add steps or constraints, so confirm whether your property sits in an incorporated town and check both town and County requirements.
Permits and licensing: where to start
Building and structural permits are issued by the Department of Permitting Services, and the ADU license is handled by DHCA. A common path looks like this:
Zoning and feasibility. Confirm setbacks, lot coverage, and utility access using Montgomery County DPS guidance.
ADU license application. Apply for the DHCA Class 3 ADU license if your ADU is not grandfathered. The County will inspect for housing and safety compliance before issuing the license via DHCA’s licensing page.
Building permits. Submit construction or conversion plans to DPS and complete required inspections as work progresses.
Waivers if needed. If you cannot meet a standard, such as parking, you may seek a waiver through the Office of Zoning and Administrative Hearings (OZAH).
How to pay for an ADU
You have several viable financing routes. The right fit depends on your equity, credit profile, and whether you are buying a home and adding an ADU or improving your current property.
Renovation mortgages
- FHA 203(k). A government-backed rehab loan that can roll ADU construction into a purchase or refinance. Recent policy changes allow some ADU rental income to count during underwriting. Learn more in HUD’s announcement on ADU income in FHA loans: HUD/FHA Mortgagee Letter update.
- Conventional renovation, such as Fannie Mae HomeStyle. A single loan that finances improvements using the “as-completed” value. Many conventional lenders follow Fannie Mae guidance on ADUs and rental income. See Fannie Mae rental income guidance.
Construction-to-permanent loans
These offer short-term construction financing that converts to a permanent mortgage after completion. They can be a strong fit for detached ADUs and larger additions. Underwriting typically relies on appraised “as-completed” value and your qualifications.
Home equity and cash-out options
- HELOC or home equity loan. Useful if you have strong equity and want flexible draws or a fixed second-lien loan.
- Cash-out refinance. Replaces your existing mortgage with a larger one to free up funds for the ADU. Weigh closing costs and today’s rates against second-lien options.
Using ADU rental income to qualify
Policy updates have made ADU projects more attainable:
- FHA allows lenders to consider a portion of ADU rent when you qualify. Generally, up to 75 percent of estimated rent for existing ADUs and up to 50 percent for planned ADUs under certain FHA 203(k) scenarios, per HUD’s 2023 policy update.
- Conventional lenders often follow Fannie Mae’s rental income framework, which allows ADU rent on one-unit primary residences with documentation such as an appraiser’s rent schedule. Review Fannie Mae’s rental income rules.
Lenders typically ask for either a current lease or an appraiser’s market rent schedule. Bring realistic rent comps and a draft lease to your lender to support assumptions.
Quick lender checklist
- Ask if the lender accepts appraiser-estimated ADU rent for your loan type.
- Confirm how much ADU income can be counted and what documentation is required.
- Verify timing and draw schedules if you choose renovation or construction loans.
Costs, timeline, and taxes in Montgomery County
Budget ranges vary by type and finish level. Conversions, such as basements and garages, often run on the lower end. Detached new builds and custom cottages cost more. Nationally, many conversions fall around 40,000 to 150,000 dollars, while detached units often range from about 90,000 to 200,000 dollars or more in higher-cost metros. See a helpful overview of ranges from The Mortgage Reports. In the Chevy Chase area, labor and permitting tend to push costs toward the higher end of national ranges.
A conservative planning window from first design to permit issuance is often 8 to 16 weeks in Montgomery County. Construction commonly takes 3 to 9 months, depending on scope and contractor capacity. Licensing inspections and sign posting are part of the process, as outlined by DHCA.
Expect your assessed value to rise when you add an ADU. New construction or substantial improvements typically trigger a supplemental or updated assessment, which can increase annual property taxes. For timing and appeal procedures, consult Maryland SDAT.
Step-by-step plan for Chevy Chase homeowners
Feasibility check. Confirm zoning, setbacks, and whether your address is inside an incorporated town. Start with DPS’s accessory structure guidance.
Budget and lender pre-check. Get a rough builder estimate and speak with a lender who understands ADUs. Ask how ADU rent can be treated when qualifying, and review HUD’s update on ADU income for FHA loans in the HUD release.
Design and contractor selection. Choose a designer and contractor with Montgomery County permit experience. Request references and examples of ADU approvals.
Apply for licensing and permits. Submit your DHCA Class 3 ADU license application and your DPS building permits. If you need a standards waiver, explore OZAH’s process.
Construction and inspections. Coordinate draws if you’re using a renovation or construction loan. Complete building inspections, then finalize your ADU license after DHCA’s compliance checks.
Leasing and compliance. If renting the ADU, use a written lease, keep records, and maintain required rental licensing and safety standards through DHCA’s landlord resources.
Tips for buyers and sellers
If you’re selling, make sure any existing ADU is fully permitted and licensed so buyers can treat it as legal. Gather your DHCA license, DPS permit history, and final inspections to streamline disclosure.
If you’re buying, verify the ADU’s status early. Ask for the DHCA license and DPS permit records during due diligence. Clarify expectations around parking, owner occupancy, and leasing so there are no surprises after closing.
Ready to map out your ADU strategy around a purchase or sale in Chevy Chase? Reach out to Dalys Keith for tailored guidance rooted in neighborhood expertise and a service-first approach.
FAQs
What are the first steps to build an ADU in Chevy Chase?
- Start with a zoning and feasibility review, then apply for the DHCA Class 3 ADU license and DPS building permits; see County guidance on ADUs and permits through DHCA and DPS.
Can I use ADU rental income to help qualify for a mortgage?
- Yes, in many cases; FHA now permits a portion of ADU rent to count for qualifying, and conventional lenders often follow Fannie Mae’s rental income framework.
Are short-term rentals allowed for ADUs in Montgomery County?
- No; ADUs are not eligible for short-term rental use under County rules, so plan for long-term occupancy if you intend to rent.
How much does an ADU typically cost near Chevy Chase?
- Conversions commonly range from about 40,000 to 150,000 dollars, and detached units from roughly 90,000 to 200,000 dollars or more in high-cost areas, with local projects often trending higher due to labor and permitting.
Will adding an ADU increase my property taxes in Montgomery County?
- Most likely; new construction or substantial improvements typically lead to a higher assessed value and increased property taxes, subject to state and county assessment procedures.
