It is difficult to guess at the reasonableness of your bank's position with the information provided.What "flak" are you getting? Is the bank asking for more money, refusing to close, or just your loan officer making a comment?

What is the amount of the loan? What is the appraisal amount as-is? How much was the appraisal deduction for the unfinished kitchen.

The bank may be protecting their interest or they could just be being stupid. Neither are rarities.

The bank didn't go out. Rather, they sent the appraiser out in order for the appraiser to issue a certificate of completion to them. Without a complete kitchen the appraiser can't issue the certification. It's not in the lender's paperwork, they can't go to final financing.

Bad news, you are going to have to finish the kitchen before you can get the final financing.

I had a construction to perm project once where the owner didn't build the detached garage. As it was included in the valuation, I had to fully reappraise the house without a garage. It cost them the price of a full appraisal, but it was a reasonable solution for their situation.

In your case, final financing is not going to be available because the house is not in a state of completion. You need to finish the kitchen including the cabinet drawers and doors. Missing hardware or a missing light fixture is one thing. Missing cabinetry doors and drawers is another. The lender is lending money for a completed home.

What homechef said. The bank is lending you money on the whole house. If something goes awry and you don’t finish the kitchen and don’t make your payments, the bank will be stuck with a house with an unfinished kitchen. The bank isn’t going to want to do that.

I don't think the bank cares about the unfinished kitchen. So far as I know homes are required to have a functional kitchen, which is refrigeration, cooking, and sanitation in order to qualify for a mortgage. You are not required to have finished kitchen and you can grab this from Ikea for $400 if you were.

What the bank may care about is if the home is finished as per the original agreement. If the plans submitted to the bank stated "unfinished kitchen" then the homeowner would generally only need the refrigerator, range, and sink. However, if the homeowner submitted plans for a full kitchen, even if the cost was not part of the original loan the bank may require the kitchen be completed to those submitted specifications, as the loan was conditional on completion.

The appraisal will be adjusted, probably in a punitive way, and that is the bank's protection.

ETA: My first build had no kitchen cabinets when we moved in and it was financed. I built the cabinets after I built my shop...and just in case anyone is wondering, my wife would not approve that order of operations again.

A construction loan (and there are different types) are not like a mortgage. You don't get a lump sum; you get it in increments when a certain stage of construction meets the lender's time line. The unfinished kitchen is not meeting what the lender expects at this point in time. The fact you did not include the cost of the kitchen in the loan has no baring. Until it is finished you won't get more money.

I don't understand why you did not include the cost of the kitchen in the loan. With interest rates low, using after tax pocket money doesn't make sense to me.

I am assuming you have a construction-to-permanent loan arrangement.

Not all areas require the things bry mentioned. "So far as I know homes are required to have a functional kitchen, which is refrigeration, cooking, and sanitation in order to qualify for a mortgage." If they did there would be fewer loans made in this area as appliances may or may not be included and in many older homes the only thing that is there is a plug in or connector for a stove and a higher than normal plug in for the refrigerator. One of the why is it like that questions I have always had was why was there a plug in where the refrigerator would go half way up the wall. A sink is normally expected as is a functioning bathroom.

The unfinished kitchen could easily effect appraised values by $50-100k+.

Just to be clear, HUD requires a working kitchen for all HUD loans. Which means any loan that Fannie Mae or Freddie Mac buys must have a functional kitchen. Which means all loans are effectively required to have functional kitchens.

Appliances do not have to transfer as they are personal, not real, property so many houses don't technically have a functional kitchen at the time of the time of the loan funding. This is a weird glitch in the system but technically you are not allowed to forego buying those things. Really no one cares about those things but by law they are required by HUD.