Our bank recently wrote a construction loan into permanent financing. The loan was originally for the purpose of doing extensive remodeling to an existing home including adding on a 3rd story. Original home was purchased for $130,000. Customers put about $600,000 into the project. Would this be reported as home improvement regardless of the $ amount of improvements. The $ amount is making me question whether it should be a purchase instead.

If the original loan (construction) did not include funds towards the purchase of the property, then won't the take out or perm financing of the construction loan be a refinance (vs. HI)?
I was under the impression refinance of home improvement was still refinance - in reviewing the def'n in Getting It Right, I think that is correct but never 100% on anything.

This will depend on your procedures. For us we would approve this as a HI const/perm loan and report it as a HI loan when it went to permanent financing.