First of all, the question that you should be asking yourself is whether or not you want to invest in such an undertaking. 

If you think that you need to make some additions, then your focus should be on the amount that you're thinking of borrowing.  If it's something small, like redoing a room or adding on a patio, then you'll most likely want to look at options for home improvement loans--essentially, second mortgages that have slightly higher interest rates than first mortgages, as well as additional fees.  There are also some lenders that will need to see plans and information regarding the specific type of construction (in order to compare it against the value of your home, as well as any liens against the property). 

An alternative is to go for an equity second mortgage, or HELOC, so that you can build at your own pace and not be required to obtain building plans and info.

While making your decision between whether you want a line of credit for home improvement(s) or taking out a home equity loan, make sure to weigh your options.  Each loan is essentially a second mortgage.  The exception to this is that the home equity loan is a lump sum that the lender will require you to pay back at a fixed interest rate, while the line of credit will function as a credit card, complete with repayment on principle at a variable interest rate with a revolving balance.

The problems that arise are if your lender decides to opt for a "subject to" in valuing the improvement you wish to make, especially when your equity on the home can't cover a new lien.  When this occurs, you can either go for a home improvement loan (mentioned above) or a renovation loan.  

Types of renovation loans: 1) purchase and 2) refinance. 

With a Purchase Renovation (Rehab) Loan, the work that will be done to the home can occur almost immediately after closing on the home.  For a transaction involving a single loan and closing, the money goes toward purchasing the property, as well as the renovating process.  The minimum down payment is approximately 3 to 5% of the completed value of the renovation.  The amount leftover can be borrowed.

On the other hand, a Refinance Renovation (Rehab) Loan, is quite similar to the Purchase Renovation Loan, with the difference being that it is an option for individuals that already own the property that they want to renovate.  For this option, if there is any financing on the property, it is paid off and more funds that go toward the renovations will be provided.  Note: you will need to qualify for certain types of Refinance Renovation Loans, and have the option of borrowing up to 100% of the value of your newly completed home

Types of Programs for Renovation Loans:

• Fannie Mae Homestyle Program
• FHA 203K Program
• Other

 The Fannie Mae Homestyle Program - can buy a house and repair/improve it (an all-in-one option), can also use for refinancing an existing mortgage, can borrow money for improvements or repairs to a currently-owned home, fixed or ARM's are available, option of financing up to 6 months of mortgage payments for properties that are being occupied by the owner in order to cover the costs incurred during construction if/when the property cannot be inhabited (caveat: loan amount is adjusted annually, money used to make renovations are limited to 50% of the completed value of the house, 5% minimum down payment, need to have fairly good credit and verifiable income, there are some limitations on the type of properties that this can be applied to)

The FHA 203K Program (HUD's Section 203K Loan) - differs from a renovation loan, and doesn't cost as much, but allows you to use mortgage credit if you are buying or refinancing a home that will be repaired or modernized, better option for those who can't qualify based on their credit, income, or down payments, helps those seeking a single, fixed- or adjustable-rate, long-term loan to take care of purchasing and renovating a property, option of financing up to 6 months of mortgage payments for properties that are being occupied by the owner in order to cover the costs incurred during construction if/when the property cannot be inhabited (caveat: increased level of supervision of the homeowner, loan based on completed value/capped at FHA max. mortgage limits that are adjusted annually, 3.5% minimum down payment, some limits on types of repairs, excludes investors/non-owner occupied)

Other options: Self Builds - the homeowner is a general contractor and can show that they're able to complete any renovations with their applicable expertise/experience, Unlimited loan amounts - for properties that have a higher value--since these loans aren't subject to the limitations of Fannie Mae or the FHA, Low/No Income Documentation Loans, No Limit on the Amount/Scope of Renovations, Complete Gut Jobs/Teardowns, Debt Consolidation, Use funds recoup funds used for work already completed.