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#2005643 - 04/01/15 06:58 PM Purchase or Home Improvement
Colorado Girl Offline
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Joined: Mar 2013
Posts: 67
Applicant has requested a loan to purchase an adjacent condo to her existing primary residence, knock down a wall, add a staircase between the two, and combine both units as her primary residence.
I see this initially as a purchase, that's the first thing that happens with the funds; but then, the unit that is purchased combines with her current residence and ceases to exist alone.
Is this a purchase or a home improvement?
Thank you in advance!

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#2005647 - 04/01/15 07:15 PM Re: Purchase or Home Improvement Colorado Girl
Melissa S Offline
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Melissa S
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Maine
In order of reporting to HMDA: Purchase, home improvement, refinance. So if you have a loan that will serve two purposes - such as purchase and home improvement - you would always report as a home purchase. Purchase trumps improvement as improvement trumps refinance.
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#2005662 - 04/01/15 07:50 PM Re: Purchase or Home Improvement Colorado Girl
Colorado Girl Offline
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Yes, I know the order of reporting. But I was second guessing if I could really call it a purchase since in the end it's more like an addition to the existing condo and the condo being purchased ceases to exist once the wall comes down between the two condos.
I was equating it to the end intention of the credit, which was addition. Trying to complete the LAR was a little iffy, for instance, owner occupancy would be primary, but not because she's moving, but instead because it combines to her existing.
Too much thought on this one! That always gets me into trouble.

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#2005665 - 04/01/15 07:53 PM Re: Purchase or Home Improvement Colorado Girl
raitchjay Offline
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Really a good question and i don't think you'll see anything in the reg. or GIR that explicitly covers this. As such, i think you could (probably successfully) argue it either way. I'd probably stick with purchase also; i think with a documented file you'd be fine (like i said, i actually think you'd be fine with "home improvement" too, so long as you documented your reasoning).
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#2005666 - 04/01/15 07:55 PM Re: Purchase or Home Improvement Colorado Girl
raitchjay Offline
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The more i think on it....i do think i'd lean HI....the intent of the loan isn't really to purchase a dwelling, but to (by knocking down some walls) improve her existing dwelling, so much like you wouldn't report at all a loan to purchase a dwelling that the borrower was going to turn into a dentist's office, i like your reasoning of looking at the intent. Sorry....hope i'm not just muddling this for you.
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#2005674 - 04/01/15 08:05 PM Re: Purchase or Home Improvement Colorado Girl
Colorado Girl Offline
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Joined: Mar 2013
Posts: 67
Thank you raitchjay! I love discussion on the weird ones! And I agree with you on the intent in purchasing a dwelling to be a dentists office; or if they're purchasing a property that has a dwelling that is to be demolished (not reportable because the intent isn't to purchase the dwelling), even though the dwelling was purchased prior to demolition or dentist office conversion.
This one is just so out of the box, the 'purchase' would be more like purchasing the supplies to make an addition, the supplies are just conveniently already constructed and right next door?!?
Last edited by Colorado Girl; 04/01/15 08:06 PM.
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#2005676 - 04/01/15 08:07 PM Re: Purchase or Home Improvement Colorado Girl
raitchjay Offline
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Just to muddy it a bit more....since in reality, the 2 dwellings will merge in one, you could still argue that she is 'purchasing' a dwelling, since....how do you 'discriminate' against the purchased dwelling and say that's not the one she's residing in? laugh You get what i'm saying? She will be living in the one she's buying...just like she'll be living in the one she already lives in. smile
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#2005685 - 04/01/15 08:19 PM Re: Purchase or Home Improvement Colorado Girl
Colorado Girl Offline
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Joined: Mar 2013
Posts: 67
Yes, I was just having that same conversation! She is purchasing a primary residence, but not leaving her primary residence, instead, they merge to become one. Thank goodness it's not a common situation.

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#2005688 - 04/01/15 08:20 PM Re: Purchase or Home Improvement Colorado Girl
raitchjay Offline
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I really think you'd be fine either way...you've obviously thought through the scenario from both sides...i think you'd do fine in arguing your position if challenged on it.
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#2005696 - 04/01/15 08:28 PM Re: Purchase or Home Improvement Colorado Girl
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
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Bloomington, IN
I would not support the home improvement classification.

This is a home purchase (individual condo which is a dwelling by deifnition) and renovation loan therefore it is a home purchase.
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#2005697 - 04/01/15 08:28 PM Re: Purchase or Home Improvement Colorado Girl
Colorado Girl Offline
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Joined: Mar 2013
Posts: 67
Thank you for talking it through with me! I really appreciate it!

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#2005700 - 04/01/15 08:33 PM Re: Purchase or Home Improvement Colorado Girl
raitchjay Offline
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Dan.....i think you've made me see the light...my dentist's office example really doesn't work here, as you can't make the argument that the condo won't be used as a dwelling after consummation. It will be...combined with the original condo. You're right; the improvement aspect doesn't cancel out the purchase of the dwelling.
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#2005725 - 04/01/15 09:32 PM Re: Purchase or Home Improvement Colorado Girl
Colorado Girl Offline
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Joined: Mar 2013
Posts: 67
Thank you Dan! Even if in the future the address ceases to exist, at time of closing DOT shows her taking ownership of the unit as it's own unit. In the end, I agree that this is a Purchase. Why was that so hard for me?!
Is it 5 o'clock yet?!

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