They may be lower in your area, but make sure to calculate them properly especially when putting that much capital behind a project.

.- The bank will use the lower of the appraisal or purchase price for their loan. 

@Elaine Lai As others have said, your down payment/equity is much lower than almost all banks will require (generally require 20-25% of total costs (land, hard & soft construction costs). 

According to him to lower the interest to 4.5.

I don't know the area but $1,700 a month for a $125k house seems off, and if you are in PA I believe that your property taxes are fairly high 2%+Also expect to pay points either way with a HML or conventional lender, the interest rate for conventional will be significantly lower.

I will be acquiring the property as a primary residence so hopefully I can find someone with a reasonable LTV and lower down payment.

We purchased a 4-unit in the Lakeview/Lower West Side area last July and moved into the one vacant apartment while retaining the tenants in the other 3 units.

Your rents may be higher or lower than surrounding units, which should tell you something.  

A substantially lower entry point compared to buying a property and you'll get hands on experience in evaluating properties. 

Maybe next week I'll put in a lower offer if they haven't sold.