I'm curious as to what you ended up doing? Costs? I'm also looking into a ranch where a second story needs to built. The architect is quoting me 250K! This seems to be very overpriced based on everything I've read online. Looks like it should be somewhere between 70K-150K in Chicago suburbs. Thanks!
I'm guessing you're probably still in the process now as of when I read this but you possibly have many options here.
You could use a Full 203k to add the second story and the appraisal will be done on the future value of your home. The bids and write-up from the consultant and architectual drawings will be required before the appraiser can do their job but that's probably the stage you're still working on given the cost and complexity of what you're doing (I recently had a client spend two months deciding on contractors and cost for a ~200k project).
The HomeStyle renovation loan is a conventional version of this as well that'll offer the same thing but requires a slightly larger equity position.
If the home happens to be a jumbo loan, my company just introduced a Jumbo Renovation product as well that can finance well over 1m though it does require a larger down payment than either of the two options above it. Since this is a new product, guidelines will change over time, best to call and ask about the current guidelines.
The 203k loan would be the better choice if you or perhaps your Realtor who sold you the home think the home won't appraise out with all the work you're doing or will definitely come in a little low. You can use 110% of the future value of your home for your calculations to determine your max loan amount (that doesn't mean a 110 LTV loan though but close). The conventional version doesn't allow for this so if you're 5% equity short, you're bringing 5% equity to the closing table). If qualifying your ratios are very tight or high (>45%), the 203k is your only option as the conventional version won't give an automated approval over a 45% debt-to-income ratio.
There's so much that I could go over here, best to stop here for now. If you need anything, you may contact me via my profile or you may call my cell @ 847.404.7006..
Small banks will be mach likely to approve you faster for a construction loan!
Your best bet MAY be, in fact, to sell and buy another (cheaper?) home with a 203k loan that will allow you to get the money you need to fix up the new (cheaper) home. Bringing money to closing isn't the worst thing in the world if it gets you into a better situation. But beware: the 203k loan is complicated, takes a long time to get approved and really requires someone who specializes in doing that particular loan. Evelyn below mentioned Christine dePaepe with Guaranteed Rate. She could be a good choice for you.
Quality Mortgage Lending
RATED A+ WITH THE BBB
*We do Conventional loans down to a 620 score
*We do FHA loans down to a 580 score
*We do USDA loans down to a 620 score (no money down)
*We do $100 down payment FHA program
*Unlimited Loan To Value refinances on Fannie/Freddie refinances (only on loans originated before May 31st 2009
*We do VA loans down to a 620 score
*We give free counseling on what needs to be done to improve your credit score.
*We do 203k loans down to a 620 score
*We do reverse mortgages
*We do JUMBO loans to 12 million
A 203k can be a great option as well - however conventional financing will save you a lot of money in upfront fees as well as mortgage insurance.
The key will be the future value of the property. Please call me to discuss your options
Senior VP of Mortgage Lending
773 290 0455
No banks are not giving away money any longer. If fact they were not giving it away than. They just let the system collapse and have all of us tax payers bail them out.
Ok that is my banking blurb...
Try your local community bank especially if you already have an established account. Also my go to lender is Mary Kay Laurent with Guaranteed Rate 773-516-6859. Tell here I referred you and if she is unable to assist you I promise if she has a resource she will point you in the right direction.
Best of Luck...