Your Loan Officer Friend is providing you with "straight scoop" on this score.
In the end, all debt is going to be rolled into one big new Mortgage on the New Property anyway (and your Loan Officer already approved you for that loan amount, I assume).
Let's just hope you can prepare the current Home For Sale and get it sold to dovetail with the completion of construction on the new one . . . . like clockwork. You don't want to forget that it needs to be a "New Home" for your Buyer, so don't abandon it !
Unfortunately, many home-building Sellers forget this and begin treating the current home with benign neglect, like an unwanted step-child, while they focus their attention on the construction project . . . . all while achieving "top dollar" for the current home is the key to success for this whole process. It must not be forgotten about; especially when your scenario appears to require conforming to a "tight" budget.
Good Luck !
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"