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construction loan,is it based on appraisal or actual cost


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hi - wondering about construction loan financing:

* say, $200k estimated final appraised value of house.

* if i contract it/construct it myself, save 20% or $40k

* that would leave actual construction costs at 80% of appraised value.

Therefore, can i walk into the deal with nothing down, get $160k/80% loan, build house, and not put any down payment or other of my money into the deal, effectively giving me a 100% loan ?

Have thought of a workaround in putting down $40k, building house, then pulling the $40k out by refinancing at 80% of the $200k appraised value, but would rather cut to the chase & just get approvals for $160k to start with.


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Sorry, I wish that loans worked that way. Purchases are all based on your actual cost in the project or home. You may qualify for a 100% purchase price loan, and to have that work, for the lenders that I know about, you would need to get a builder to build the home and have a "take out" loan in place for when it is completed.

One thought is to work with a local bank that works with builders, get the construction loan through them-they know you and the area better than a national lender-then have the long term loan from a traditional "non-bank" lender if your bank does not want to get you perm financing, or if you dont like their long term plans.


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