If we have a loan to satisfy an existing lien on a vacant lot and provide funds for the initial construction of a dwelling on that lot, what would the purpose be for the Loan Estimate? The loan will be secured by the lot and new construction.
This would be a refinance. There are four possible loan purposes on the Loan Estimate and Closing Disclosure: Purchase, Refinance, Construction and Home equity. For loans with multiple purposes, you would list Purchase over Refinance, Refinance over Construction, and Construction over Home Equity.
In this case, we have two purposes. A refinance of an existing lien that is secured by the property, and the initial construction of a dwelling – so a Refinance and a Construction loan. Since Refinance trumps Construction, you would list the loan purpose on the Loan Estimate and Closing Disclosure as a “Refinance”.
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