Originally posted in general forum:

Situation: Customer is having property conveyed to him from child. A new note is being generated for x amount of dollars which is the payoff and the "purchase price". The appraised value is x amount above purchase price.

Question: Would you treat this transaction as a purchase or a refinance to determine the LTV.

I'd treat it as a purchase - your borrower is paying money to have title transferred to him.

I would treat the transaction as a purchase, as lglover indicated. Since there is a transfer of title and a fee paid accordingly. You should, however, discuss this with your lender if it is a secondary market loan. The last one we did was a purchase and the difference between what the house sold for and the actual market value was noted as a 'gift' and a gift affidavit signed. You should talk with your end loan provider to make sure you are in agreement there or you may be buying the loan back.

Did your customer have any ownership interest before? If not, this is definitely a purchase. If your customer owned a percent and is now acquiring 100%, this is a refinance. See the commentary to the definition of "residential mortgage transaction" in TIL for an example.