Short answer - yes.

The bank will require an appraisal based on the total value of your completed project. Assuming your completed project appraises for $205k or more, you would have an $85K "down payment". Since banks are all about risk, they only like to lend 70% of the full project cost, so you are well under that - and therefore - this is less risky for the bank. (assuming decent credit scores).

Bank will want plans and a contract from the builder. And then will order the appraisal. And then close the loan.

Sometimes, local / community banks are better sources for these loans than the "big guys". Consider your credit union (if you are a member) or a local bank.

Hi, it depends on the bank, but yes. Kind of... with the bank we chose it works like this. At the end of your construction your house (+land) will appraise for x. As long as your house and land appraise for >205K you're in the black and gaining equity, and there is no problem using your land for equity. If your new house appraises <205k you need to be aware that you are losing money. Not a deal breaker, but your down payment is no longer 85k. Say your new house appraises for 170k. That means you have a loan for 170k with 50k down payment. Still >20% down so you should be cool with the bank, but you just lost 35k.

What do homes of similar size and finish level appraise for in your area? That is the key. If they appraise for 100K, and you have no cash reserves, you are in big trouble. If they appraise for 200K, you will be fine as long as you keep the upgrades to only out of pocket paid for.

The collateral for the loan (the house +land) cannot be less than the cost of the build. It would be like asking the bank for a 100K loan for a customized automobile that Blue Book value on is 15K. Someone values the work and materials that went into making that, but they will have to be a cash buyer. Same with a 300K upscale house in a neighborhood of 50K rural farmhouses. No way that will happen without cash.

I would ask in the buying and selling a home forum.

Building a custom home on land you own is different from buying or selling an existing home in many respects. For starters, the appraisal will be based on plans and specifications vs. tangible product. The market comparables used for the appraisal of your home may not be very comparable to what you intend to build. The appraisal process is highly regulated, and is pretty much dumbed down to no. of bedrooms, no. of baths and total finished living area. Don't look to inject any sanity into it.

Many lenders in our (coastal VA) area use an 80% loan-to-value ratio which means they'll loan you up to 80% of the value of the total package (home and land.) So, if you own your lot and it represents 20% or more of the value of the home/lot package, you can finance all of the construction costs.

Best wishes for a successful project.

We did exactly that with our credit union when we built our house.

There's only 3 houses near me, (I'm in the mountains, 8 miles outside of a super small town) 2 of them are pretty high end, the 3rd is nice as well.

I got my property appraised not even a year after I bought it and it was 20G higher than what I paid for it. So that's a good sign I would imagine.

Thanks for the replies so far.