We have a customer that is building a cottage on a lot that they already have with a cabin already on that lot. The Cottage will be newly constructed on a concrete slab and the existing cabin will remain and will be used for extra sleeping quarters. The new loan is paying down (not off) a HELOC and the rest of the proceeds will be used for the construction project. So...would this be a home purchase, Home improvement or not reportable (construction loan??? However it is a 3/1 ARM)

bump

I'll take a guess at it.
3/1 ARM so it sounds like it's not temporary therefore not construction.
It's not built so it wouldn't fit the construction perm mold making it a purchase either.
I think it's definitely reportable so I'm going to opt for one heck of a home improvement.

"The new loan is paying down (not off) a HELOC and the rest of the proceeds will be used for the construction project"

I would go with purchase. You are funding the construction of the cottage, even though not via a typical construction loan...you are giving them all of the funds at once, the remaining funds will pay off another loan. I feel that the purchase piece overrides the rest, regardless of the split of the $ on purpose.

Thank you Kathleen B!!

Is the new loan dwelling-secured? I would say purchase as well, as long as the new loan is secured by some kind of dwelling per Reg C: Home purchase loan means a loan secured by and made for the purpose of purchasing a dwelling.

Well, the loan is a 3/1 ARM.

Aye, missed that part at the end!