We are choosing to disclose construction & long term financing as one transaction.
In the case of the estimated construction interest then, we will use Appendix D to calculate the estimated amount and will ensure borrower has it in their construction costs budget, but we do not require an interest reserve and interest is billed to the customer monthly based on the amount of funds advanced.
When I create the preliminary TIL, the amount financed box disregards the estimated construction interest. This does not seem right?

Please help!!!

Interest that accrues on the loan during the loan term never impacts the amount financed. Your estimated construction interest will be reflected in the finance charge box.

Since you're following Part II of Appendix D, is this the requirement you're questioning?

Part II(B)
1. Estimated interest payable during the construction period shall be treated for computation purposes as a prepaid finance charge (although it shall not be treated as a prepaid finance charge for disclosure purposes).

This calculation procedure is designed to collapse the construction period and recast it as an exceptionally long first payment period in an otherwise normal TIL calculation. As explained in paragraph 1, you're only pretending that construction interest is a PFC for calculation purposes. After the calculations are done, you disclose the construction interest in the manner it will actually be paid.

That was my stumbling block and now it makes sense.... thank you very much!