Looking for guidance on calculating an APR on a loan for a home purchase $220,000 plus $40,000 for improvements. Total loan amount $260,000. Interest only for 6 months while improvements are made and then goes into amortizing payments for 360 months.
Commentary to Appendix D states it "may also be used in multiple-advance transactions other than construction loans, when the amounts or timing of advances is unknown at consummation." My question is if we use Appendix D should the amount of estimated interest only payments be calculated based on $130,000 (half of the full loan amount) or $240,000 (full purchase price advanced at closing $220,000 + $20,000 half funds for improvements)?
Our software is using $130,000 which makes the initial payment disclosed on the LE and CD and interest only payment based on $130,000. This does not seem right since we know we are going to advance $220,000 for the purchase at closing.