My wife and I are nearing the completion of our new ...

If I understand your situation, you have a purchase contract with your builder. The builder used your purchase contract to obtain construction financing. Now you are going to obtain a new loan to "take out" the construction financing.

The home loan business has changed a lot in the last few weeks. The financial threads and investor sites are all reporting then news of a dozen or more loan companies closing their doors. Almost all of the other loan companies are revising their loan programs to be more conservative. Property values (based on appraisals) are declining almost everywhere. 100% loans are a thing of the past.

Your situation is, at the most fundamental level, no different than if I were to find a house that was priced below the market, and I were to buy it. Once the purchase contract were signed, I would be in a position identical in all material respects to yours. To "use that equity" during the acquisition phase would not be possible for me.

But there are other ways to do this. If you found a lender that had some imagination, they could make you a signature loan for the $35,000 right now. You would pledge your interest in the house (now, your interest is only a purchase contract) as well as your future interest (your ownership, once the purchase transaction were completed).

You would have an understanding with that lender that once you were "moved in", you would sign for a "home equity line of credit"... and use the HELOC to pay off your signature loan.

If you could only get $25K instead of $35K that would still be better than not getting to "use the equity".

Meanwhile your signature loan would be your down payment. Once the HELOC came through you could bank the proceeds, invest it somewhere else, or take a vacation.

But I can't imagine a lender who would directly let you use the difference in value as a down payment.