Financing a Fixer-Upper

[Karen Stone]

I'm new to the flipping houses business. We haven't started yet, and wondering how to go about everything. We currently live in our own house that we have two additional reno loans (therefore, we have 3 total loans - a mortgage, an LOC, and a regular loan). From what we know, no one wants to be the "3rd lien", so to get this started, we are hoping to refinance the house we own, and then buy our first fixer-upper.

We would not have the funds out right, so we'll obviously need to take out a mortgage for that house.  SO...my question is:  how does it work when you buy a house, knowing you need to make renovations?  If, for example, you buy a house for $100,000, and expect the renovations to cost $25,000...would the bank just issue you a $125,000 mortgage?  Or is there a special type of mortgage?  And do they just give you the $25,000?  

That may be a silly question, but any advice would be very helpful!  Thank you!