As-Completed Appraisal

There is no finished house to appraise when a construction loan is made, often just dirt or a partial structure, so the appraiser has to work from the plans, specifications, and finishes instead. The result is an as-completed appraisal, a value that estimates what the finished home will be worth on the open market rather than what exists today. That future number is the figure a construction lender cares about.

Lenders use the as-completed value to set how much they will lend. Your loan amount is capped by a loan-to-value (LTV) ratio against that future value, and on a construction-to-permanent loan it also factors against total cost. So if the as-completed appraisal comes in at $900,000, the lender lends a percentage of that, which in turn tells you how much cash or land equity you need to bring to close the gap. A low appraisal can shrink the loan and force you to cover more out of pocket.

The appraisal is tied to your exact plans, which is why selections matter. Fannie Mae's guidance for single-closing construction-to-permanent loans uses the "as completed" appraised value, and requires a completion report at the end to confirm the home was built to those plans. If the finished home does not match, or the appraiser later finds the value declined, the lender can require a new appraisal and requalify the borrower.

For example, a Cave Creek borrower submits final plans and a finish schedule, and the appraiser, using comparable finished homes nearby, sets an as-completed value of $950,000. The lender sizes the construction loan from that number, not from the bare lot's current value.

Because the whole loan rests on it, give the appraiser complete, accurate plans and a real finish schedule. An honest, well-supported as-completed appraisal is what makes the construction loan, the interest reserve, and the draw schedule all add up.