Construction loan and existing mortgage.

You have a unique situation, and the best advice I can give you is to contact a local mortgage broker, not a bank, and apply with them.. because of the vast number of lenders they deal with they can find the right loan for your particualr scenario... WilliamAcres.com

You may want to consider an FHA 203k consultant loan..you can tear the house down to the foundation and build from there...of course you have to have plans, a HUD consultant etc. if you need a referral for a good 203k lender in NY let me know...

If the home is owned free and clear, or if you owe very little then you are most likely looking at a construction loan. Another option would be a 203k rehabilitation loan. This is an FHA loan that would allow you to pay off the balance owed on the property and provide funds to improve an existing home. The program allows you to completely rebuild, meaning you can tear an existing home to its foundation and rebuild, but you have to keep the existing foundation as part of the project. If you are looking to build a new basement home, then this may not fit the 203k criteria. Look for a local Mortgage Banker/Broker that is certified as and FHA 203k lender. Try to stay away from the big banks. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you and guide you into the one that makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com