Lenders today are once again offering home construction loans. These loan can be used for home remodeling, room additions and for new or ground up home construction. These programs are offered in conventional loan structures. The FHA 203K program does allow for remodeling and in some cases room additions but it does not allow for new construction. With both loan structure you are able to use the “as complete” value when determining the LTV, loan to value, ratio. The LTV will cap the amount you can borrower regardless to your ability to repay the loan.
Soft cost can be built into these loan structures but confirm with your Lender as not every Lender will allow soft cost to be built in. Soft cost are defined as all cost not associated with the the actual build cost. Such as permits, architect fees, etc. as these are cost that are not directly associated with the physical build.
Most of these loans are setup to convert to long term financing after the build is completed. This loan structure is not always your best option so please look closely at the post construction financing.
Just as with any mortgage the only fee you should ever have to pay is for the appraisal only and not until after you receive your approval. The same no fee rule applies, no fees other than appraisal and not until after conditional approval.