What loan should we use?

At this point in time, the best loan for you is none. As you are taking on a major financial burden with the purchase of a home, until you know what your expenses will be each month, you should not assume additional financial burden. Trust me, you will be surprised at what your average monthly expenses are when you are a homeowner.

Wait at least a year, and keep track of your expenditures and your income carefully.

If you have equity in the home. I would try a home equity line of credit. That way you are not paying interest on money you have not used. Its just the same as a second mortgage, but it does not give you a lump sum, you can just take it out as you need it. If there is not any equity in the home it will be harder to get a loan based on the value of the home no matter what you are going to do to improve it. With no equity it might be best to use credit cards for the improvements, (assuming that you have nothing of value that a bank can use for collateral against an unsecured personal note) then refinance after the improvements and pay off the credit cards. Using this method, you should make improvements that will add value to your home, that way you will not have a problem getting it refinanced for the amount of money you have in the home.

You're probably going to get a 2nd mortgage loan for this; that's if you qualify. During this economy, if you can put out 20% downpayment, which is the minimum these days, you should be able to get a 2nd loan. Otherwise, you'll be lucky to even get the first mortgage loan. You can also look into a home equity loan after you get the house.

The issue here is that a new loan on your credit before purchasing a home may impact your credit and you have more debt showing on your credit report. A home equity line of credit would not be the best idea. If possible, borrower more for the purchase. Where are you looking to purchase, I might be able to assist you, email me if you wish, jrome78@yahoo.com