>You think you can put up about $600k in the remodel well that puts you as $1.5M and you think a $1.6M house is unaffordable.

Our math was 700k (what we bought the house for) + 600k remodel = 1.3M, as that's what we'll be paying the mortgage on.
As for financing, I talked to our mortgage bank who was ready to provide a construction loan for 600k.

>Would it be possible to add a garage or carport without needing a rebuild?

Definitely, but the core problem is that we've already run out of space here.

That's a good point. We factored in 15% overage from their estimate, but in reality it's sure to be more than that.

>Spend more time house hunting and figure out needs versus wants.

Admittedly we've only been searching for a couple of months, but the houses in the districts we do want with the amenities we're looking for are well over our budget. There are maybe 4 or 5 towns that we've got our eyes on, factoring school districts and ease of public transport into the city and due to these very factors, homes in these towns are very very expensive.

We're partial to the area because of the commute (easy access to public transport), neighborhood and that it's generally a really nice area. We did consider moving to one of the towns further away that does have A+ districts but they were too far from our friends/family for our liking.