FHA Cashout refi limits?

FHA Cashout refi limits?FHA Cashout refi limits?
Neila asked 4 years ago

I own a 2 bedroom/1 bath house that is worth $ 220K, which is also what I owe on it.  I had a friend who is a licensed appraiser do an appraisal on the home as it is now (which gave me the value of $ 220K), and had him also do an “as completed” appraisal based on plans I had drawn up for converting the attached one car garage to a master suite, which would add 250 SF of living space and bring it to a 3 bedroom/2 bath.  The as completed value came in at $ 280K.  I considered doing a 203K in order to finance this and it would have cost about $ 40K to have a contractor do it and to get the loan.  I’d end up with some equity, but not much.  

 

On the other hand, doing the work myself, (I did construction work for a long time but am not licensed, plus 203K does not allow licensed contractors to work on their own homes anyway) I spec’ed out the materials and I can do it for $ 10K.  So the question is, if I were to charge $ 10K in materials at Lowes and just pay the minimums during construction, and then refinance, would I be able to tap the $ 45K or so in equity (after rolling in closing costs) in order to pay off the Lowes card?  If not, the alternative would be to put it on the market, but the whole reason for coming up with this plan was to stay in the home because we like the neighborhood, the schools, etc…

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