[Sandy]

We are doing a TRID loan. The vacant property held for collateral is being gifted to our borrower on day of closing and the loan proceeds is to construct their personal residence. Should the PURPOSE be shown as PURCHASE even though no money is switching hands? Also, if shown as PURCHASE do we state that the SALES PRICE shown on the from of the LE as $0 ?

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[jholzknecht]

Since the credit is not financing the acquisition of the property securing the loan it is not shown as a “purchase” loan. It should be shown as “construction.” The Sales Price is only shown on a purchase loan. You should disclose the property value.

[Lawren McCoy]

We have a similar situation.. but also different.

TRID loan. Vacant land / constructing residence. The contract with the builder is $500,000 total. Our loan is $344,000 for construction of the home. The buyer is bringing $156,000 cash at closing to cover the land purchase ($112,000) and the rest of the construction portion – paid to the builder directly. So the buyer will own the land at closing. We have it reported as construction purpose for our loan. Would that be correct? They are not purchasing the land from the proceeds of our loan. We do have the property value of the loan listed as the full amount of contract, land + construction.

[jholzknecht]

I agree that the Purpose should be listed as “Construction.” For a transaction that does not involve a seller you disclose the estimated property value based on your own estimate, unless you have already received an appraisal.

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