That means you will not be able to sell it to someone using a FHA, Conventional loan etc. 

Since I am now the "bank" or "lender" I have all the rights of that lender to enforce recovery up to the full outstanding balance of the loan.

Even if you do a cash out refi, you still need to pay off the initial loan, and then will not have enough money to pay all cash on the next and so on when prices are at a high premium.   

The state paid about $35,000 down for us and our mortgage was about $820/month ($123k loan amortized over 30 years at 4.5%).

Also, do the math - does demoing your current house + paying off the current mortgage immediately, then getting a construction loan make sense?

If you can find a vacant lot the bank includes the land cost into the loan so you save money in the long run. 

Hi Nolan - Have you explored DSCR loans?

@Nancy MillsMake sure you have the person also sign a personal guarantee on the loan --- that's pretty normal. 

However, based on the loans they are telling people to get and the course time frame - that is heavily implied as doable. 

However we have been having trouble finding a lender that is willing to allow us to get the full 80 percent loan to value in a refinance.